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How to Configure Crypto Assets? A Beginners' Guide
Beginner
2025-07-29 | 15m
The emergence of Bitcoin over a decade ago ignited a financial revolution that continues to reshape global markets. Today, with institutional adoption accelerating and crypto ownership surpassing 420 million users worldwide, new investors encounter both extraordinary opportunities and complex decisions. Beyond Bitcoin’s pioneering role, the ecosystem now hosts over 26,000 diverse digital assets – from stable value anchors to speculative tokens – creating a labyrinth of choices. This guide illuminates the crypto landscape, helping investors distinguish between asset classes while emphasizing strategic allocation and psychological resilience. As markets evolve, understanding these fundamentals becomes essential for navigating volatility that dwarfs traditional assets, with crypto exhibiting 230% average annual price swings compared to the S&P 500’s 18%.
Understanding and Selecting Crypto Assets
After more than a decade of development, Bitcoin has gradually been accepted and recognized by investors. More and more users outside the circle have begun to understand Bitcoin and choose to enter the crypto world. After entering this world, we find that there is not only Bitcoin as an investment target, but investors also have hundreds of asset allocation options.
Mainstream Cryptocurrencies
Cryptocurrencies that rank at the top of the crypto market capitalization rankings are often referred to as mainstream coins. They are characterized by a large user base, strong trading volume, high market activity, and a history of proven resilience to risk. Mainstream coins generally enjoy strong market consensus, possess significant practical application value, and offer better liquidity than typical crypto assets, making them widely recognized investment targets.
Therefore, for novice users who have just entered the market, it is relatively more appropriate to allocate mainstream assets, such as
Bitcoin , Ethereum, Litecoin, Ripple, etc. Bitcoin, as the first crypto asset, occupies half of the entire crypto asset market value. Many old users will use its trend as the main reference for allocating other assets.
These mainstream currencies have high market awareness, strong liquidity, and relatively low investment risks. They can be said to be a wise choice for new users to invest in crypto assets.
Altcoins
Compared with mainstream currencies, the word "altcoin" in altcoin is not a derogatory term. It is also a kind of encrypted asset generated by blockchain technology. It's just that its market awareness, consensus and liquidity are not as high as mainstream currencies. However, if there is an outbreak of heat, it will also perform well. For example, the hotly speculated Meme coins, the explosive public chain tokens, as well as GameFi, Layer 2, DeFi, NFT concept coins, etc., are all leaders of investment booms in different time periods.
So, do altcoins have investment value? This question is somewhat subjective. Judging from the historical price trends of altcoins, their fluctuations are quite volatile. Therefore, it will take time and the market to test their value.
Before investing in a particular altcoin, new users should first understand its nature, its potential applications, and their investment objectives. Invest cautiously within your own capabilities and risk tolerance.
Stablecoins & Platform Coins
There are also concepts such as stablecoins and platform coins among crypto assets .
Stablecoins, as the name suggests, are digital assets that are not subject to price fluctuations. Their most significant characteristic is price stability, unlike the sudden surges and plunges of Bitcoin. To maintain price stability, stablecoins must be backed by an alternative value, such as the US dollar, gold, or another basket of fiat currencies. This is why there are numerous US dollar-denominated stablecoins (such as USDT and GUSD), as well as Facebook's Diem (Libra) stablecoin project.
The emergence of dollar-denominated stablecoins primarily addresses two issues: 1) excessive price volatility in digital currencies; and 2) serving as a medium of exchange between fiat currencies and cryptocurrencies. Currently, the oldest stablecoin is USDT, issued by Tether, a company established by Bitfinex, the world's largest digital currency trading platform. It is pegged to the US dollar, with one USDT trading at approximately one US dollar. Users deposit US dollars in Tether's bank accounts, and Tether issues USD certificates priced at one US dollar. Simply put, the number of USDT issued reflects the amount of US dollar reserves held by Tether. In addition to USDT, there are other stablecoins, including USDC, TUSD, Gemini Dollar, Dai, and Paxos.
Platform coins refer to the tokens/universal points of digital asset trading platforms. Because they are mostly used within the platforms, they are also called platform coins by investors. However, precisely because they rely on trading platforms, they inherently possess their own trading and circulation value.
Concentrated vs Diversified Crypto Portfolios
There are two main strategies for constructing a crypto portfolio: building a concentrated portfolio or a highly diversified portfolio. Each approach comes with trade-offs that you should consider.
Concentrated
A concentrated portfolio holds only a few assets which you have high(er) exposure to.
Holding a select number of assets can generate higher returns if those assets prove to perform strongly over periods of time. However, picking winning assets is no easy feat and requires much more skill, and often luck. The probability of picking high performers reduces with the lower number of assets you have exposure to. Moreover, with the potential for high reward comes an equal potential for high risk.
Concentrated portfolios can be much more susceptible to volatility and carry considerable risk as every little change in market sentiment can have ripple effects on your portfolio, which can be amplified if your holdings are in more volatile assets such as small caps They also create a concentration of risk and larger downside exposure if an investor is allocated to only one or a few assets in similar sectors of the crypto market. Overexposure to a single protocol and the assets that live in that ecosystem can put investors at risk if something goes wrong, like in the case of the Terra LUNA fiasco.
Diversified
A diverse portfolio holds various crypto assets, usually across multiple sectors or protocols. Holding a variety of assets helps the investor mitigate market risk since all their eggs aren’t concentrated in one basket. The structure of these portfolios also tends to be better fortified against market volatility. If the price of one asset drops significantly, the assets unaffected by the price drop can help offset or minimise any losses. This logic guides equities investors who amend the weight of their portfolio allocated to defensive, cyclical and sensitive companies/sectors – each acting differently in certain market conditions.
Diversified portfolios distribute volatility and risk, as they mirror trends across the market. As a result, the performance of this portfolio may not go up, or down, as much as more concentrated portfolios – this safeguards against extreme negative price performance and risk.
For beginner investors, diversified portfolios tend to give greater balance and less volatility compared to concentrated portfolios. It’s why many invest in traditional markets via the S&P 500, where their wealth is shared across a large number of companies. If one falls, the hit won’t be as significant if that same company made up one of ten in a narrower portfolio.
Diversified Your Investment Profolio
For new users entering the cryptocurrency market, it's recommended to invest some of your idle funds. When allocating assets, avoid putting all your assets into one place. Learn to allocate different crypto assets across different positions to reduce investment risk. For example, if you have $1,000 in idle funds, you can invest the majority in mainstream cryptocurrencies like Bitcoin and Ethereum. If you recognize the value of mainstream cryptocurrencies, consider extending your investment period. The remaining small amount can be allocated to altcoins. However, due to the high volatility of altcoins, it's important to carefully manage risk. If you lack complete confidence and experience, it's recommended not to hold on to them for long periods of time. After all, the high risks inherent in these investments may not be acceptable to all investors.
Asset allocation is essentially about leveraging the risk differences between different assets to reduce overall risk and lower the volatility of your portfolio. True diversification requires a differentiated selection of investment platforms and financial products, focusing on multiple factors, such as platform type, product type, investment period, and expected returns.
After understanding the crypto asset allocation, new users should also pay attention to the timing of their entry. Choosing the optimal entry time often yields greater returns. If you've done your homework, understand and appreciate the concept and value of crypto assets and are ready to enter, then every market crash is a good time to enter. Extend your investment cycle appropriately and avoid short-term fluctuations in exchange for greater returns. If you're a new user with limited knowledge of crypto assets and have only heard of popular coins like Bitcoin and Dogecoin, you need to understand the overall market trends and the historical price trends of the crypto assets you're interested in investing in. You should also stay informed about the latest news to help you make informed decisions, buy low and sell high, and profit from market fluctuations. Of course, the crypto asset market is highly volatile, so risk management is essential.
Position Management and Mentality Management
Strategic Allocation and Risk Mitigation
Whenever there are large fluctuations in the crypto market, position management and mentality management become extremely important.
Many investors prioritize making money as the primary goal of investing. This isn't the case. Warren Buffett, the legendary investor, once shared his investment philosophy: preserving principal. The same holds true for crypto asset investments. During periods of market volatility, capital preservation is the primary goal, followed by profit. Every qualified investor needs to develop their own position management system, always remembering to maintain strict stop-loss orders. While many people know about compounding positions, this approach is equivalent to abandoning position management. Therefore, strict stop-loss orders are essential; ignoring them will inevitably lead to a complete loss.
Mastering the Psychological Game
Furthermore, mindset management is a point that many investors often overlook. Some investors familiar with K-line analysis can be incredibly knowledgeable when analyzing trends or technical aspects, such as left-side trading, right-side trading, and Fibonacci retracements. However, if they fail to manage their mindset properly, one or two misjudgments can lead to immense frustration and self-doubt, potentially impacting their future investment and financial management for a long time. After all, humans are not gods, and every judgment cannot be perfect. If investors can properly manage their mindset, even if they make a few misjudgments, they can quickly recover and regroup. This mindset management can enhance investor confidence in trading.
Good mindset management involves considering and accepting risks, resisting fear of motivating others (FOMO), eliminating illusions, and managing return expectations. As the ancients said, "A general should consider defeat before considering victory; thus, he can fight a hundred battles without danger." Conversely, failing to accept risk is risk avoidance, and the consequences can be disastrous. For example, risk-averse investors are prone to experiencing fear of FOMO (Fear of Motivation) when the market is bullish. This tendency to blindly buy into a particular cryptoasset without analyzing the market is likely to lead to regret when the asset declines.
Conclusion
As a new investor about to enter the market, or already in the market, it's important not only to thoroughly examine mainstream currencies like Bitcoin, but also to gain a deeper understanding of the uses and value of other blockchain projects. Once you recognize the value of the blockchain projects you're researching, such as the popular DeFi, NFT, and Polkadot sectors, your investment confidence will be strengthened, and your understanding of risk and stop-loss orders will become clearer. Of course, like any other investment, crypto asset investing isn't all about profit; it also carries risks. Therefore, investors should pay attention to position management and mindset, and manage risk appropriately.
Reference:
Caleb & Brown. (n.d.).
Balanced crypto portfolio. Caleb and Brown Blog.
https://calebandbrown.com/blog/balanced-crypto-portfolio/
CoinCatch Team
Disclaimer:
Digital asset prices carry high market risk and price volatility. You should carefully consider your investment experience, financial situation, investment objectives, and risk tolerance. CoinCatch is not responsible for any losses that may occur. This article should not be considered financial advice.
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