Crypto portfolio building is the process of selecting and investing in a variety of crypto assets to achieve financial goals. There are two main approaches to crypto portfolio building: horizontal and vertical.
Horizontal crypto portfolio building involves investing in a variety of crypto assets that are unrelated to each other. This approach is designed to reduce risk and provide exposure to a wider range of opportunities.
Here are some examples of horizontal crypto portfolio building:
• Investing in both Bitcoin and Ethereum, the two largest cryptocurrencies by market capitalization.
• Investing in a variety of different altcoins, such as Bnb, Cardano, and Polkadot.
• Investing in both decentralized finance (DeFi) and non-fungible token (NFT) projects.
Vertical crypto portfolio building involves investing in a variety of crypto assets that are related to each other. This approach is designed to increase returns by taking on more risk.
Here are some examples of vertical crypto portfolio building:
• Investing in both a blockchain infrastructure project and a decentralized application (dApp) that is built on that infrastructure.
• Investing in a variety of different DeFi projects that are complementary to each other.
• Investing in a variety of different NFT projects that are part of the same ecosystem.
Which approach is better?
The best approach to crypto portfolio building depends on your individual circumstances and goals. If you are new to crypto investing, it is generally recommended to start with a horizontal portfolio. This will help you to reduce your risk and learn more about the industry before expanding into new areas.
Once you have a good understanding of the crypto industry and have built up a risk tolerance, you may want to consider expanding your portfolio vertically. This can help you to further diversify your risk and reach a wider range of opportunities.
It is important to note that there is no one-size-fits-all answer to this question. The best approach for you will vary depending on your individual circumstances and goals.
Tips for Choosing Between Horizantal and Vertical Crypto Portfolio Building
Risk tolerance:
Vertical crypto portfolio building is riskier than horizontal crypto portfolio building. This is because you are putting all your eggs in one basket by investing in related projects. If one project fails, it is more likely to have a devastating impact on your overall portfolio.
Investment goals:
If you are looking for a long-term investment, horizontal crypto portfolio building is a good option. This is because it allows you to invest in a variety of different projects with different potential growth trajectories. If you are looking for a short-term investment, vertical crypto portfolio building may be a better option, as it allows you to take advantage of short-term trends.
Knowledge and experience:
Vertical crypto portfolio building requires a deeper understanding of the crypto industry. This is because you need to be able to identify projects that are truly complementary to each other. If you are new to crypto investing, it is generally recommended to start with a horizontal portfolio.
Both horizontal and vertical crypto portfolio building have their own advantages and disadvantages. The best approach for you will depend on your individual circumstances and goals.
