So you bought Ethereum and Bitcoin and now are asking yourself “what else?”
It’s great that you want to diversify, but there’s a few things you should know before getting started.
1) Any time you buy a coin other than Bitcoin (BTC) or Ethereum (ETH) you are banking on the fact that the coin you buy will increase more than either BTC or ETH does in the same time period. This is absolutely possible, but it does require time and effort to research the other coin before you buy. If you are not someone that would enjoy the research and you’re not planning on investing much anyway, it may be better to invest in BTC and ETH and hold. Speaking very generally, many of the rises and falls of coins have followed bitcoin’s rise and fall (bitcoin up, other coins up, etc.). Picking the right coin could mean a bigger return than just sticking with BTC or ETH, but you still need to pick the right coin.
That being said, if you’re looking to put a good deal of money in (“a good deal” to be interpreted by you), then diversifying is still a smart move.
2) When deciding which coin to buy, it is more important to look at a coin’s market cap rather than at its price.
Market Cap stands for Market Capitalisation and it is the current price of the coin multiplied by the circulating supply.
To compare market caps, start by going to Coin Market Cap: https://coinmarketcap.com/
This is Bitcoin’s current market cap:
Ex: 16,827,412 bitcoins multiplied by it’s current price ($10,710.10) is a market cap of $180,223,265,261.
Right now, the top three coins are Bitcoin, Ethereum and Ripple.
If all you look at is the price, it seems to make sense to buy Ripple (XRP). It’s only $1.20!
But now look at the Circulating Supply category. XRP has a way higher supply than either BTC or ETH.
Here’s this handy tool that will let you compare coins based on current market cap: http://matchcoins.info/?c2=ripple&c1=ethereum
Put the coin with the larger market cap in the left field and the coin with the smaller market cap in the right field. When you do that with ETH and XRP you see that if Ripple had the same market cap as Ethereum, it would raise 2.14x to $2.59.
That is really awesome! You’ve more than doubled your money!
Now let’s see what happens if it had the same market cap as BTC:
Whoo hoo! That’s awesome! That’s a 3.85x gain!
But how likely is it?
But what this is also telling me is that’s kind of the best case scenario. If you buy XRP right now and tomorrow it hits Bitcoin’s current market cap, then the best you can hope for is a 3.85x return.
This doesn’t take into account the fact that tomorrow Bitcoin’s market cap could be higher too, etc. etc., but you get the idea.
In sum: Coins with a higher circulating supply have to work harder for big increases in gains.
But it’s unfair to compare XRP to ETH and BTC. They aim to do different things. This tool works a lot better if you’re comparing apples to apples. Or at least, two coins that are tying to do the same thing.
So let’s look at two coins that are similar.
Monero and Dash
Also, when you want to pull out your investment into regular old fiat, you will most likely have to trade your coin back to Bitcoin or Ethereum to do it. One thing that does concern me about the whole space is the bottleneck of trying to pull out. If there is a major crash and everyone tries to pull out at once.. It won’t be possible. Something to keep in mind.
Obligatory warning: Nothing is safe in the crypto world! Its all volatile. Never spend more than you are willing to lose.
Also, If it’s only a small amount of money, you don’t really “need” to diversify that much. If you have a lot at stake, diversify a good amount.
It depends on how interesting this stuff is to you. If you enjoy researching cryptos, diversify away. If it feels like a slog, it depends on how much ‘a little bit’ is to you. Don’t bother spending hours and hours of your life to reduce your risk level on a $200 investment, but if you’re talking about $20,000 you need to just sit down and do the work because being diversified is the only responsible way to invest.
Safe (and easy)
Bitcoin and ethereum – You can buy either of these on Coinbase and it’s pretty much just a point and shoot job. They’re the big kids on the playground so if they go down they’re going to take a lot of the other guys out with them. There about as safe as you can be in the crypto world. But they’re also some of the most expensive and so unless you buy a lot you’re less likely to get a catch a big pop.
Once you want to get beyond ETH and BTC it’s important to know a few things:
These things change like the wind, but these are my current top picks for strong coins that have a lot of potential:
Ripple – Comparatively cheap but has a very large market cap. I believe the creator himself said he only though it could go to $6 per coin. This isn’t necessarily a bad thing. I’d personally prefer 1000 $1 coins than 1 $1000 coin.
Neo – China’s Ethereum. I actually think it’s better than ETH because you can program on it in a few different languages (you need to learn Solidity to program on the ETH blockchain). Could be huge if China drops their ban on ICOs because then blockchain start-ups might be more inclined to build their projects using Neo. I’m hoping to buy more and then going to do a dance to the Lords of Kobol and pray that China un-bans. 😉
A privacy coin like Monero or Dash – These are a privacy coins. With the US tax changes I can see reason why people will start turning towards them. I personally prefer Monero over Dash because Dash has some scamm-y beginnings (basically – due to an instamine situation in Dash’s early day’s it’s possible 10% of the coins are in a very few hands which is bad for everyone else). However, Monero is a community project and requires volunteers so it doesn’t have deliverables and KPIs like a company. YMMV on what you prefer. I still haven’t decided between the two of them and wanted in on a privacy coin so I went 50/50. Here’s a list of other privacy coins:
iversify in solid coins like eth, xmr, Iota and put a small portion into potential flyer coins like required, wtc, ark,…
This is my current portfolio:
This is my dream ratio (hoping BTC pops up a bit to do it):
33% BTC | 33% ETH | 20% Neo |
The problem is we’re spoiled for choice. There are many cool coins with great teams and they all could (and hopefully do) go up. After all the research and due diligence, choosing the one that really hits it off will come down to luck.
Loved but not yet invested
Chainlink – I love this one but their marketing isn’t there compared to the others. It’s a bit of a pet love
Buyer Beware! Pump and dumps are a thing and they bank on you not really understanding what you’re investing in. Basically, if you’re seeing a lot of. “X-Coin is the next Bitcoin! Buy now or miss out” DOESN’T mean buy now. Sure, have a look at the white paper, do the diligence, but don’t get FOMO. Pump and dumpers pray on your fear so try to be as cold as ice when looking through the stuff. This is your money. Be vigilant and don’t let the herd mentality sway you. All easier said than done, I know.
40% Eth or bitcoin, your choice. Almost sure things to rise. Low risk coin.
30% OMG, could explode in 2018 and make huge movements if they deliver. I say this is low to medium risk coin.
20% POWR, still new, could also explode, good looking project, medium risk coin
10% some random coin that might explode one day, I say MOD. Lol. High risk coin. But to me MOD is actually low risk since it’s still close enough to ICO price.