How to Configure Cryptocurrency Assets for Beginners? Read This Article and It's Enough

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As we know, risk and profit have a proportional relationship; higher profits come with greater risks. In the world of cryptocurrency assets, investing in mainstream coins carries much lower risk compared to altcoins, which is why it's not hard to understand why some altcoins offer higher returns than mainstream coins. Different types of assets in the cryptocurrency market have their own advantages and disadvantages, so for beginners, which cryptocurrency assets should they invest in? And how should they manage positions and adjust psychology when investing?

1. Understanding and selecting types of cryptocurrency assets

After over a decade of development, Bitcoin has gradually gained user acceptance and recognition, with more and more users from outside the industry starting to learn about Bitcoin and choosing to enter the cryptocurrency world. When stepping into this world, we realize that not only is there Bitcoin, but there are also hundreds, even thousands, of asset choices for investment.

1.1. Mainstream coins

Cryptocurrency assets with large market capitalization, ranking at the top of the charts, are often referred to as mainstream coins. These coins are characterized by a broad user base, good trading depth, active markets, and most have withstood the test of time, possessing strong risk resistance. Mainstream coins in the cryptocurrency market typically have strong consensus, significant practical application value, and better liquidity compared to other cryptocurrency assets. These are the assets commonly chosen by general investors.

Therefore, for newcomers to the market, investing in mainstream assets like Bitcoin, Ethereum, Litecoin, Ripple is a reasonable choice. Bitcoin, as the first cryptocurrency, accounts for half of the cryptocurrency market value; many long-term users view its fluctuations as a reference indicator for investing in other assets. You can refer to articles such as "What is Bitcoin?", "Why is Bitcoin worth investing in?", and other articles about mainstream coins.

These mainstream coins are well-known in the market, have strong liquidity, and relatively low investment risk, making them a smart choice for newcomers entering the cryptocurrency market.

1.2. Altcoin

Altcoins are cryptocurrencies other than Bitcoin. The term "altcoin" is not a negative term; it simply refers to cryptocurrency assets that use blockchain technology but have lower recognition, consensus, and liquidity compared to Bitcoin. However, if there is a surge, altcoins can also perform very well, for example, meme coins, tokens from blockchain platforms, GameFi, Layer 2, DeFi, NFT, etc., have all been hot investment trends in different periods.

So, do altcoins have investment value? The answer still depends on individual perspectives. Looking at the historical price trends of altcoins, large price fluctuations are easily noticeable. Therefore, it takes time and the market to verify their value.

For beginners, before investing in any altcoin, it is necessary to clearly understand what its essence is? Does it have practical applications? What is the purpose of investing in altcoins? Once you have a clear understanding and are confident about your risk tolerance and capacity, beginners can consider investing.

1.3. Stablecoin and platform tokens

In cryptocurrency assets, there are also concepts like stablecoin and platform tokens.

Stablecoin, as the name suggests, is a digital asset not affected by price volatility. Its biggest characteristic is stable value and no strong fluctuations like Bitcoin. To maintain price stability, stablecoins are often backed by alternative values, such as USD, gold, or a basket of fiat currencies. Therefore, there are stablecoins like USDT, GUSD, etc.

Stablecoins were created mainly to solve two problems: 1) The excessive price volatility of cryptocurrencies. 2) Acting as an intermediary for exchange between fiat currency and cryptocurrency. The oldest stablecoin is USDT, issued by the company Tether (created by the cryptocurrency exchange Bitfinex), it pegs its value to USD, 1 USDT equals 1 USD.

Besides USDT, there are other stablecoins such as USDC, TUSD, GUSD, DAI, PAX, etc.

Platform tokens are tokens issued by cryptocurrency exchanges, primarily used within the exchange, hence called platform tokens. But precisely because they are based on exchanges, they have their own trading value and liquidity. For example: OKB from the OKX exchange.

2. Asset allocation and position management

For newcomers, start with idle money, do not invest too much in a single type of asset. Allocate assets into different coins to minimize risk. If you have 1000 USD, you can invest the majority in mainstream coins like Bitcoin, Ethereum. If you believe in the value of mainstream coins, you can extend the investment period. The remaining portion can be invested in altcoins, but because altcoins have strong volatility, risk control is necessary. If uncertain and lacking experience, avoid long-term holding as altcoins carry high risk.

"Don't put all your eggs in one basket" is important advice, but also don't be greedy, don't invest too much in too many types of assets. Diversified investment involves choosing differences between platforms and investment products, including differences in platform types, products, investment periods, profit expectations, etc.

3. Position management and psychology

When the cryptocurrency market experiences large fluctuations, position management and psychology become extremely important. Many investors see making money as the main goal, but this is not always correct. Warren Buffett, the famous investor, has shared his investment philosophy: "Protecting the principal is the top priority." When participating in the cryptocurrency market, the most important thing is to protect the principal, then think about making profits. Each investor needs to build their own position management system and always have a strict stop-loss strategy.

Additionally, psychology is also an important factor that cannot be ignored. Some investors are good at trend and technical analysis, but if they cannot control their psychology, they easily fall into failure and self-doubt. Psychological management is a crucial factor that helps you maintain confidence and make correct decisions in difficult situations.

Conclusion: As a newcomer to the cryptocurrency market, you need to carefully evaluate mainstream coins like Bitcoin, while also understanding other blockchain projects and their practical value. When you understand and believe in a blockchain project, such as DeFi, NFT, Polkadot, your investment confidence will increase, as will your ability to identify risks and entry/exit points for taking profits or cutting losses. Remember that investing in cryptocurrency is like investing in other assets; there are always risks, so position management and psychology are indispensable factors.

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