Asset management is the process of monitoring, purchasing, and selling investments in order to maximize portfolio diversification, balance risk, and/or increase the return on investment. The process of applying the same exercise to digital assets based on blockchain technology is known as crypto asset management.
Asset management tools capable of handling various digital assets have become essential for today’s investors, as well as the financial professionals who assist them.
Passive Income From Crypto
One way to make money in the blockchain industry is to trade or invest in projects. However, you will need to thoroughly research the subject of your investment and spend a significant amount of time on it, which doesn’t guarantee a reliable source of income.
Even the best investors can suffer long periods of continuous losses, and the only way to stay afloat is to have alternative sources to make passive income with crypto.
Crypto Capital Management
Crypto capital management is the process of adjusting the balance of positions to reduce risk and increase the value of trading accounts. This strategy limits the amount of equity in a single trade to 5% of the total account value. The indicator can be less, but not more. As the account value changes, so does the dollar value of 5%. The 5% cap, on the other hand, ensures that you don’t put your entire account at risk as a result of a single position.
For example, suppose you have 10,000 USDT in your futures wallet. In this case, the risk per trade should be between $100 and $200 USDT. If something goes wrong during the process, you will only lose 1-2% of the account’s capital.
Risk management entails using positions of a reasonable size, being able to use a stop loss, and considering the risk-to-reward ratio. A solid crypto capital management strategy will assist you in developing a worry-free portfolio. More information about the risks you can find in our article “A Complete Guide to DeFi Risks and How to Manage Them”.
Rebalancing Crypto Portfolio
To mitigate the risks associated with asset allocation, cryptocurrency traders are now turning to portfolio rebalancing.
Rebalancing is the process of returning your portfolio’s cryptocurrencies to their original state. You should understand that rebalancing is a tool, not a goal. Cryptocurrency rebalancing allows investors to increase their current profits by taking advantage of rapid price volatility.
Let’s say you have 30% Ethereum (ETH) and 70% Bitcoin (BTC) in your portfolio. Ethereum’s weight increased by up to 50% between January 2020 and March 2020. To reduce risk, sell 20% Ethereum and buy 20% Bitcoin (BTC) to restore the portfolio’s original asset allocation of 30% Ethereum and 70% Bitcoin.
When rebalancing a portfolio, investors use the portfolio’s previous asset ratio to maintain the desired asset allocation structure. The goal of employing this strategy is to establish a risk management structure that ensures the success or failure of one or two assets is not dependent on a single investment or market.
Investing in Decentralized Finance
Decentralized finance, or DeFi for short, is a network of financial applications built on blockchain networks. DeFi is also used to provide transparent financial services that operate without the control of any central authority. Anyone who owns a cryptocurrency can use DeFi. Furthermore, the majority of DeFi ecosystems have their own coin that powers their own blockchain network.
Decentralized finance allows for the creation of open, public, and fair markets that are accessible to anyone with an internet connection. Transactions on them are transparent and are confirmed by other network users. In addition, the data on the blockchain is tamper-proof, secure and verifiable. Users have complete control over their assets and interact with the DeFi ecosystem via P2P and decentralized applications.
Benefits of DeFi
- Flexibility and speed
You can trade and transfer your assets wherever you want without worrying about bank transfers or paying bank fees. Furthermore, transactions are carried out in real time, and interest rates are updated several times per minute.
- Publicly available
One of the most significant benefits of DeFi is easy access to financial services. Anyone with a crypto wallet and internet access can use DeFi services.
- Transparency
DeFi data is hack-proof, secure, and verifiable thanks to blockchain technology. Every transaction on the blockchain is viewable and verifiable.
- Full control over assets
DeFi applications don’t require intermediaries or arbitrators. Users can fully control their funds within the ecosystem by using non-custodial cryptocurrency wallets or a smart contract-based escrow service. The escrow service stores the tokens involved in the transaction until its conditions are met.
Invest In Cryptocurrency Platform
Cryptocurrency funds are similar to traditional exchange-traded funds that are linked to a specific sector of the economy, except that the link is to the digital money area.
The selection of a crypto fund begins with an examination of its market reputation as well as an analysis of its work history. One of the hallmarks of fraudulent funds is the promise to investors of guaranteed and high returns.
