Diversifying A Cryptocurrency Portfolio Shouldn’t Be So Complicated

The cryptocurrency market is a diverse and rapidly changing world. There are a plethora of platforms and protocols to interact with, with over 10,000 projects already launched and new coins seem to be emerging all the time. That’s a lot to take in, and most new investors simply don’t have the time or expertise to figure it all out.

This retains a portion of the population that would otherwise bring new liquidity to these markets. Fortunately, there are tools that open the otherwise complicated doors of professional portfolio management to virtually anyone interested.

Cryptocurrency markets are complex places

To start participating in the crypto markets, users have to go through complicated wallet setups where losing or forgetting a 12-word seed phrase can lead to permanent loss of funds. Once a wallet is set up, ensuring the correct wallet address is connected to the correct network when transferring funds is often not an automated process. If sent to the wrong address, funds may become unrecoverable.

The decentralized finance (DeFi) industry complicates things further, introducing complex instruments such as wrapped assets and liquidity pools – not to mention clunky user interfaces.

Users also have to navigate regulatory uncertainty surrounding crypto assets and platforms, which further complicates market entry. Just look at Binance, the most popular exchange in the world. Despite this fact, users in the United Kingdom are legally prohibited from using the Services. The United States also banned access to the exchange, although this prompted the company to create a new US-friendly version. However, this means that customers should ensure that they are accessing the correct version of the platform.

To make matters worse, there are thousands of cryptocurrencies to choose from, with hundreds more emerging every day. Keeping up with the latest and greatest assets could be a full-time job in itself. To top it all off, scams are commonplace in crypto – not a week goes by without news of a hack, swipe, or some other form of exploitation. More recently, a stablecoin called “Cashio” was mined for around $28 million due to an “infinite glitch” located by a hacker.

There are simpler options

What is needed is a way to simplify everything. Retail and professional traders can benefit from a single point of entry that gives them exposure to a wide variety of assets, while minimizing the moving parts surrounding the trade.

Ultimately, accessing highly profitable strategies, which also comply with local regulations, should be as easy as using traditional investment instruments. Fortunately, there are tools available with this exact philosophy to help you with this effort.

In the world of traditional finance, an investor would typically look to products such as mutual funds and ETFs. With these options, clients can buy a specific asset that represents a much more diversified portfolio, better risk management and greater flexibility. This can bring a level of financial sophistication to retail investors who might otherwise not have the time or expertise to manage the same series of purchases. However, until recently, there were very few parallels in the world of digital currencies.

However, that is changing fast, as a new breed of assets called “index tokens” are expected to offer much of the same benefits as the options above, but in an even more streamlined way. Much like their legacy counterparts, these assets act as a single commodity that can be purchased and represents a share of a “basket” of assets. This means that investors get the same returns as with a more complex wallet, but they only have to buy a specific token.

Already, Amun has created index tokens to represent the broader DeFi space, as well as the specific Polygon and Solana blockchain ecosystems. All users need to do is buy one of these coins and they have instant access to the price action of the top performing projects in the related cryptocurrency space.

Conclusion

As new waves of investors enter the crypto markets, many of them will be drawn to opportunities that offer professional returns without a high degree of oversight. With modern capabilities to automate much of the portfolio management process, there is no shortage of options that can deliver complex results with a single, simple entry point. Realistically, this is what will be needed to enable further market growth and deliver the benefits of digital investing to the latest generation of traders.

Guest post by James Wang of Amun

James Wang is Head of Tokens at Amun, providing clients with diversified crypto exposure through indexed token products. Prior to joining Amun, James was a lead analyst at ARK’s next-generation internet fund, ARKW. Asset growth from $10 million to over $6 billion AUM.

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Diversifying A Cryptocurrency Portfolio Shouldn’t Be So Complicated


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