Bitcoin is the most famous cryptocurrency and is the biggest by market cap. However, a well-balanced portfolio will include a selection of different coins to reduce overall risk. Let’s go through some of them.
1. Payment coins: Nowadays we have the likes of DeFi coins, DEX coins etc. However, if you look back in time you know that most coins created were to solve the issue of transfer of value. We have Ripple, Bitcoin Cash, Litecoin and so many more. Existed before Ethereum & Programmable money.
2. Stable coins: These are coins that are pegged 1:1 to a fiat currency or an underlying asset. Eg. BUSD having 1 BUSD = 1 USD, or PAXG; 1 PAXG = 1 Ounce of Gold. Stable coins don’t usually fluctuate – it’s a very minute fluctuations in price(0.001). The cryptocurrency market is volatile, so having something in your portfolio that keeps its value is useful.
Also, most people want to hold their profit without taking it to USD dollar account where they would incure tax obligations. Though people don’t say it.
3. Security Tokens: A security token can represent many things. It could be equity in a company, a bond issued by a project, or even voting rights. Most security tokens are in the jurisdiction of local regulators and must go through a legal process before issuance just like shares.
4. Utility Tokens: Utility tokens are used as the key to access a service or product. BNB and ETH are both utility tokens to pay for transaction fees when interacting with decentralized applications (DAPPs) or other services like crypto trading on the Binance exchange.
5. Governance Tokens: These are used as voting power on DAO, DEXes, and DEFI protocols. By holding them you have the ability to participate in the decision-making or progress of such a decentralized protocol. E.g COMP token on Compound, UNI token on Uniswap
6. Crypto Financial Products: log into your Binance account – Navigate to the Finance or Earn section. You will see: Staking, Pools, Launchpad, ETH2.0, Savings, and other crypto financial products.
7. Leveraged tokens: These are tokens that give traders and investors a leveraged position in trading. This would mean that earnings and losses multiplied while using such tokens. I don’t advise newbie traders to use leverage.
Now that you have gotten a list of the 7 coins you can add to your portfolio. Kindly let me know the ones you currently have in your portfolio and the ones you plan to add in the comments below.
Thank you and God bless.
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Also, here is a link to my crypto journey since 2013.