Crypto asset management is the process of managing and overseeing your investments in cryptocurrencies; this can be done by yourself or through the help of a crypto fund manager. Because of its volatility, such as the bitcoin price plunge, it is best to use a crypto asset management company to help you hold your crypto portfolio. However, it is possible to manage and succeed in your own assets if you have the proper knowledge.
As we explain below, implementing a comprehensive crypto asset management strategy has several benefits.
Crypto asset management allows for diversification across different cryptocurrencies, reducing the risk associated with investing in a single asset.
If you invest all of your money in a single crypto asset, you are exposed to the full risk of that asset. If the asset’s price goes down, you could lose a lot of money.
However, if you diversify your portfolio across multiple crypto assets, your risk is spread out. If one asset’s price goes down, the losses may be offset by the gains of other assets in your portfolio.
Diversifying your crypto assets using stablecoins can be beneficial for hedging against market downturns. For example, you could hold a portion of your portfolio in stablecoins, which are coins that are pegged to the value of a fiat currency, such as the US dollar. This can help to protect your portfolio from losses if the overall market takes a downturn.
Some specific tips for diversifying your crypto portfolio
- Invest in a variety of crypto assets instead of one. Don’t put all of your eggs in one basket. Instead, invest in a variety of different coins, such as Bitcoin, Ethereum, Litecoin, etc.
- Invest in different categories – let your crypto portfolio be diversified across different niches. For example, you could invest in crypto assets that are related to finance, gaming, or NFTs. This can help to reduce your risk if one sector of the market underperforms.
- Also, consider investing for both short and long-term gains. For example, you could hold some crypto assets for the long term, while you could trade some more actively. This can help to reduce your risk and improve your overall returns.
Diversification helps in your crypto asset management by reducing the loss that may be associated with any potential downturns in a particular asset.
Availability of risk management tools
Effective crypto asset management helps investors mitigate risk by using stop-loss orders; this protects against significant losses. All you need to do is to set a specific price below which the trading platform automatically sells the crypto assets for you even if the threshold was reached while you were sleeping.
This option of automatically stopping any loss that may occur even when you are not online is highly beneficial to the management of your crypto assets.
One of the most significant benefits of crypto asset management is the round-the-clock accessibility to the market. Unlike traditional financial markets, which have specific trading hours and are often closed on weekends and holidays, the cryptocurrency market operates 24/7. This means that investors and traders can buy, sell, or manage their crypto assets at any time, providing unparalleled flexibility.
This makes managing crypto assets easier and better than traditional assets such as stocks.
Unlike stock markets that have specific trading hours tailored to their respective time zones, the cryptocurrency market operates continuously, allowing participants from around the world to trade at any time.
This is particularly advantageous for global investors, as it eliminates the need to adjust one’s schedule to match market hours in a different time zone. Whether you’re in New York, Australia, or London, you can participate in crypto trading at your convenience.
Crypto markets are global and decentralized, which means they are not bound by the regulations and limitations imposed by any single country or government.
The global reach of cryptocurrency markets is a transformative aspect of crypto asset management. Unlike traditional financial systems that are often restricted by national borders and regulatory frameworks, cryptocurrencies operate on a global scale, transcending geographical limitations.
This inherent global nature and inclusivity empower people who have historically been excluded from traditional financial systems, granting them the ability to store value, invest, and transact securely and conveniently.
Moreover, the global accessibility of cryptocurrency markets fosters financial innovation and diversity. It facilitates access to a vast array of digital assets beyond the confines of any single nation’s financial offerings.
No Central Authority
Unlike traditional financial systems, cryptocurrencies are not controlled by a central authority like a central bank.
This lack of central control means that there are fewer regulatory constraints, enabling individuals to have more control over their own assets and investment decisions.
The use of pair-to-pair technologies in some trading platforms such as Binance, makes it very difficult for the government to interfere; this reduces the risk of sudden policy changes affecting your investments.
This unique characteristic offers several advantages for individuals engaged in crypto asset management. This means the lack of a single regulatory authority translates to greater financial autonomy because participants in crypto asset management have a higher degree of control over their assets and financial decisions. They are not reliant on the whims of a central authority that can freeze accounts, impose capital controls, or change monetary policies.
Lower Barriers to Entry
Crypto asset management often has lower barriers to entry compared to traditional finance. Many cryptocurrency exchanges allow users to start trading with relatively small amounts of capital, making it accessible to a broader range of individuals, including those who may not have had access to traditional financial markets.
It provides global liquidity
Global liquidity is a key advantage of crypto asset management that arises from the decentralized and 24/7 nature of cryptocurrency markets.
Liquidity refers to the ease with which assets can be bought or sold without significantly affecting their price.
In traditional financial markets, liquidity can vary significantly depending on the time of day, with lower liquidity during non-trading hours.
Cryptocurrency markets, however, maintain relatively high liquidity levels at all times due to their continuous operation. This is particularly advantageous for traders and investors as it allows for the execution of orders with minimal price slippage, making it easier to enter and exit positions as desired.
The availability of global liquidity in crypto asset management extends beyond just trading. It has also fueled the growth of various financial products and services, such as lending, borrowing, and decentralized exchanges (DEXs).
These services rely on liquidity to function effectively, and the continuous nature of crypto markets ensures that users can access these services at any time, providing opportunities for yield generation and portfolio optimization.
It facilitates fast, secure, and cheap cross-border transactions
Cryptocurrencies have revolutionized cross-border transactions by simplifying and accelerating the process. Unlike traditional international money transfers that often involve multiple intermediaries, currency conversions, and significant fees, cryptocurrencies offer a more efficient and cost-effective solution.
When individuals or businesses engage in cross-border transactions using cryptocurrencies, they can do so with minimal friction and reduced overhead.
One of the key advantages of crypto asset management in cross-border transactions is speed. Cryptocurrency transactions can be settled almost instantaneously, especially for blockchain networks designed for fast confirmations. This is in stark contrast to traditional international wire transfers, which can take days to reach their destination due to intermediary banks and different time zones.
The ability to send funds quickly makes cryptocurrencies particularly appealing for businesses engaged in international trade, freelancers receiving payments from clients abroad, and individuals who need to support family members in other countries.
Security and Transparency
Blockchain technology, which underpins cryptocurrencies, is known for its security and transparency features. Transactions are recorded on a public ledger, making it difficult for fraudulent activities to go unnoticed. Additionally, crypto wallets and security practices provide users with a high level of control and security over their assets.
Ownership and Control
With crypto asset management, users have direct ownership and control over their assets. They are not reliant on intermediaries like banks or brokers, reducing the risk of frozen accounts, asset seizures, or other restrictions on their holdings.
Ownership and control are fundamental principles that distinguish crypto asset management from traditional financial systems. This means that when you hold cryptocurrencies, you have full control over your private keys, which are the cryptographic keys that grant access to your assets.
Unlike traditional financial institutions where you rely on intermediaries like banks or brokers to manage your holdings, in crypto asset management, you are your own custodian.
This offers several significant advantages such as unparalleled financial autonomy and security. Your assets are stored in a wallet that only you can access, reducing the risk of unauthorized access or theft.
This control is particularly valuable in regions with political or economic instability, where the seizure or freezing of bank accounts is a concern. In such scenarios, individuals can protect their wealth by holding cryptocurrencies in a secure wallet, ensuring that their assets remain accessible and under their control.
Another benefit of crypto asset management relating to control is the absence of intermediaries. This minimizes the risk of arbitrary account freezes or asset seizures. In traditional financial systems, financial institutions may freeze accounts or seize assets under certain circumstances, such as legal disputes, regulatory investigations, or government orders.
This can lead to significant disruptions and financial hardships for individuals. With cryptocurrencies, the decentralized nature of blockchain technology means that there is no central authority with the power to freeze accounts or seize assets.
Crypto asset management offers a range of benefits, including 24/7 accessibility, global reach, lower barriers to entry, and increased control over your financial assets. These advantages make it an appealing option for those seeking greater financial freedom and flexibility in managing their investments.Last Updated on November 2, 2023 by Nansel Nanzip Bongdap
Nansel is a serial entrepreneur and financial expert with 7+ years as a business analyst. He has a liking for marketing which he regards as an important part of business success.
He lives in Plateau State, Nigeria with his wife, Joyce, and daughter, Anael.