Practical Tips for Investing in On-Chain Tokens
In the past, I have always asked to be cautious when trading on-chain coins, and some members have done a great job. If you have been following and making a profit, congratulations. However, I must remind you that most on-chain coins, especially memes, are narrative plays that gain short-term momentum but will not become important in the long run. If you know how to trade these narratives, you should be fine.
However, I have also seen members treat some of these coins as long-term holdings. I personally advise members not to do this unless they hold risk-free, which means that the initial investment has been taken out. Most tokens will go to zero at some point, or become irrelevant, which is why they are not suitable for long-term holding. If this happens, the value of your portfolio will drop significantly.
Two most common tips for portfolios:
Diversification: Some portfolios only hold on-chain tokens, which are mostly risky investments. I think it is a wrong approach to only hold on-chain tokens in the hope of faster and bigger gains. Gains are important, but having a balanced portfolio is more important. You will be at risk of losing a lot of money because most on-chain projects will become irrelevant at some point. I personally recommend allocating 20% ââto 30% of your funds to on-chain tokens.
Allocation: I have seen some portfolios that put 10% of their funds into low-cap on-chain coins, but only 2%-3% into fundamentally strong coins like $BTC , $ETH , or $SOL . I usually recommend the opposite allocation: put a higher allocation into safe investments and a lower allocation into low-cap investments. For example, if you have a portfolio of 50K, you can put 10K into SOL, but you can't put 10K into on-chain memes because the latter is more risky. You know SOL won't go to zero, but the same can't be said for most on-chain coins.
These tips may sound common sense to some members, but I checked a lot of portfolios last night and know that many people have these on-chain coins in their long-term portfolios and have a considerable amount of funds invested in them. We all know what happened to some on-chain coins a few weeks ago when the hype around them died down and donât want to see that happen in the future.
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