If you’ve been following our educational articles, you already know that the key to success in any investment is diversification. No matter how much you believe in the project, it is always a bad idea to keep all eggs in one basket. To be considered diversified, your portfolio should contain several asset classes with low correlation.
But there is one thing: the digital assets market currently consists of more than 20 thousand different tokens besides Bitcoin, according to CoinMarketCap. Thus, we have prepared a list of top altcoins for portfolio diversification so you don’t have to.
The first crypto asset class to consider is platform tokens. It means, that the price and development of such cryptocurrencies are mostly driven by the main platform’s success and underlying technology.
The second-biggest cryptocurrency, Ethereum, was launched in 2015 and has already secured worldwide popularity through its innovative feature — smart contracts. It allows other developers to create tokens and apps on the Ethereum blockchain, making its native coin a promising asset. Some analysts even predict ETH surpassing Bitcoin one day.
Although Solana had experienced its fair share of technical difficulties with the blockchain being down on numerous occasions, the project maintains a strong position in the crypto market. Solana is often referred to as an “Ethereum killer” since it also functions as a base blockchain for many projects. Its other significant advantage over ETH is lower transaction fees.
BNB is the native coin of the world’s biggest crypto exchange Binance. Currently, the asset occupies the fifth place based on the market cap. BNB blockchain also allows the creation of new tokens on its platform, adding up to the long-term prospects of the project.
DOT is a native token of Polkadot, one of the most hyped crypto projects of 2020-2021. It aims to drive interconnectivity and interoperability between blockchains, by allowing independent chains to exchange messages without a trusted third party. In simple terms, Polkadot technology would allow us to send tokens from one blockchain to another in one click.
Another crypto class is stablecoins. As the name suggests, such cryptocurrencies have a stable price pegged to a base asset. Usually, it’s a fiat currency such as the US dollar or euro. Stablecoins allow to avoid volatility and are often used to store crypto capital.
The number-one stablecoin on the market, Tether. It is often referred to as a crypto counterpart of the US dollar and currently occupies third place from the top. The daily transaction volume of USDT reaches $63 billion.
Decentralized finance is an industry worth considering while building your crypto portfolio. De-Fi space is open-source and unregulated, advocating for true financial and digital freedom. Although such tokens can be highly profitable, they also come with higher risks.
Uniswap is the world’s number-one decentralized exchange with a $1.1 trillion all-time trade volume. Its native coin, UNI, is currently 19th on the CoinMarketCap list, while the daily transaction volume exceeds $150 million.
There is also a place for speculative assets, such as meme coins, in your crypto portfolio. However, it is a small place of no more than 5-10% depending on the trading strategy.
Created as a joke, it grew to become Elon Musk’s favorite crypto. Tesla creators’ tweets are what mostly sent DOGE price to the moon during the 2020 rally. This meme token has maintained its position in the top-20 list for over a year now, making it worth considering,
Disclaimer: think with your own head
This is just an example of altcoins you might want to consider while building a crypto portfolio. Use it as a base for further research and identify the suitable cryptocurrencies for you based on personal goals and starting opportunities.