So you decided to do it, huh? Take the plunge into crypto and own a slice of the future of our digital economy? Awesome! I’m glad you’re here. You’re probably wondering: “Now what?” Well assuming you got your exchange account on Coinbase Pro verified (or another exchange available in your area), we can get started. If you’re still waiting, you can always read through this and execute the steps later.

In this article, I’ll help you align yourself against your goals for crypto investing, provide some sample portfolios, and then finish with some advice on managing your crypto portfolio over time. But first, let’s briefly outline the way I classify different crypto asset types, as this is the core of how I establish portfolio distributions.

There Are Five Crypto Asset Types, and Here’s How Much of Your Portfolio Each of Them Should Be

You can break down the entirety of crypto in 2021 into five categories: Stablecoins, Infrastructure, DeFi, DEX/Yield Farming, and NFTs. Everything else is probably not worth your time, with some rare exceptions.

Stablecoins (0–20%)

Basically cash on the blockchain: these are coins that are pegged to a stable fiat currency like USD. It’s often a good idea to have some stablecoins in your portfolio if you’re going to be more active in the crypto space, as it will give you the ability to jump into new projects, provide liquidity to DEXes for rewards, or otherwise take advantage of opportunities. If you prefer a set-it-and-forget-it strategy, then you will probably end up with very little stablecoins in your portfolio.

Also important to note that you might want to move your savings from your bank and put it into stablecoins which you can then deposit in decentralized lending protocols (basically algorithmic banks) to earn a much better interest rate than your bank (think 5–20% APY).

Infrastructure/Gas Coins (50–80%)

These are the cryptocurrencies that power the major blockchains of today. These should probably be the majority of your portfolio, depending on how active you want to be. If you would prefer to not have to do as much research or otherwise take a more passive approach to crypto investing, then go towards the higher end of this range.

Many of these coins are able to be staked which allows you to earn a modest interest rate on your coins paid in-kind, and if you’re following a more passive strategy, then this is a good idea to keep your assets productive without exposing them to massive risk.

DeFi — Decentralized Finance (10–25%)

DeFi is a huge part of the crypto ecosystem and currently the most developed market for crypto products. This space is all about putting financial services into the hands of the masses through decentralized protocols, circumventing the banks, asset managers, and other middlemen in the finance industry. I consider this to be an important part of any crypto portfolio.

DEX/Yield Farming (5–15%)

DEXes are one of the most important aspects of the crypto ecosystem, and as such a foundational element, I feel it’s important to be an owner in one or more good DEXes in whatever blockchain ecosystem you’re most interested in.

NFTs (0–10%)

NFTs are a fairly new development in the crypto space. They are really exciting and interesting, and will ultimately spread far beyond collectibles (which is probably what you’ve heard about). It’s a good idea to get in on some NFT platforms if you can. These are harder to come by, and finding a good NFT platform can be challenging, hence why the range starts at 0%, but if you want to get into this, go for it. Also, you can directly invest in NFTs if you like, but I am more talking about the tokens that run NFT platforms.

A Note on Crypto Gaming and Other Such Projects

As the crypto space grows, there will be more and more consumer-oriented products, including so-called play-to-earn games (like Axie Infinity). These are very new developments and as such should be considered very risky investments, hence why I don’t recommend them for a core portfolio. But if you want to put 5–10% of your portfolio towards this segment, go for it. There are probably some very good investment returns to be had for the savvy investor.

How Much Do You Need to Invest?

Most people who made millions on crypto took on extreme risks by investing large sums of money during times when the outlook was not as rosy as it is today. So I want to set some realistic expectations: you’re not going to turn $1,000 into $1,000,000 in the next 12 months.

You won’t become a millionaire overnight, but it’s fun to dream.

But this industry has a lot of room to continue to grow, and hitting your goals is going to hinge on two fundamental questions: “What are you investing for (what is the goal for the money you want to earn)?” and “When do you want to achieve this goal?”

The more money you need for your goal, the more you need to be able to invest, and the longer you’re willing to hold the assets, the less you need to invest. Also shorter timelines (less than 4–5 years) are going to potentially be more affected by the trends of the crypto industry and therefor be more volatile.

My Crypto Investment Goals

To give you a concrete and personal example, my goal is to comfortably retire from Corporate America with enough cushion for one or more of my own ventures (like this publication for instance) to take over and provide enough income for me to cover my living and business expenses. In order to do that, my goal is to hit $100,000 which, minus taxes on the gains, would provide me with enough money to achieve my goal. And I wanted to achieve that in a year (from when I started investing). I have long-term goals as well, but this took priority.

What my desk will look like when I leave Corporate America. Photo by Christopher Gower on Unsplash

So given those goals — and the fact that I started investing in crypto back in May this year — I settled on 10x being a realistic target, so I aimed to invest $10,000 in order to make it $100,000 by the next year. There are more factors that went into that decision-making considering the short timeline, but again, I don’t have time to dive into that in this story. I’ll probably write about it another time.

So based on my goals, I got to work on figuring out what my portfolio should look like. Making a 10x return in a year is not possible with Bitcoin or Ethereum (the two largest assets in crypto), so I needed to find less-popular investments that felt like they had a lot of potential if I was going to hit my goal. After a lot of research (and some trial-and-error), I settled on investing in the Terra blockchain and its ecosystem which has so far worked out well for me, and I am confident that I will end up hitting my goal.

How to Determine Your Goals

Chances are, you know what your goal is (the thing you want to achieve, like leaving your job, getting an education, buying a home, etc.) and you know how much you need to achieve that goal. The challenge comes from figuring out how much you need to invest to get there and how long you need to have those investments running. I would encourage you to use the things you learn from me (and your own additional research) to help you figure that out, but if you’d like to expedite that with some personalized advice, reach out to millan@digitalnativecitizen.com, and I could arrange a 1:1 consultation.

For most people, $10,000 invested with be a good place to start, *but you don’t need this money up-front*. I invested my money (a little under $15,000) over a span of six months for instance, so don’t sweat if that is a lot of money for you. You can reach that with some patience and persistence.

But one thing is for sure, you can and definitely should start with $1,000 today. This will dip you into this world and expose you to some of the potential gains in the process.

Investing Your First $1,000

What we’re *not* going to do is buy Bitcoin. I will be writing a different story about why I believe Bitcoin is a bad investment, but for now I’ll just say that there are many alternative investment options to Bitcoin that I feel are far more useful and lucrative. Here’re some examples of what you could invest in with your first $1,000:

The Safe(r) Portfolio: Ethereum-Forward

Ethereum is the largest non-Bitcoin asset in crypto, and its size and success are so big that you’ve probably heard about it. The Ethereum blockchain was the birthplace of DeFi, algorithmic stablecoins, NFTs, crypto games, and more. This success has solidified Ethereum’s status as crypto’s top-dog, but that success also means that there is a lot less room for Ethereum’s native gas coin, Ether ($ETH) to grow. This portfolio allocation would be better if you wanted to just buy and forget about it for a long time. Here’s what you would purchase if you wanted to build an Ethereum-forward portfolio:

$600 of $ETH (Ether, native coin of the Ethereum blockchain).

$200 of $MATIC (Polygon, the largest Ethereum side-chain, $MATIC is complimentary to $ETH in terms of usage: they feed each other).

$200 of $AAVE (Governance token for the Aave Protocol, a decentralized money market on Ethereum and Polygon, and a core protocol of Ethereum DeFi).

The Multi-Chain Future: $ETH-Alternative Portfolio

Some people believe that some of Ethereum’s main competitors will eventually reach Ethereum’s size, ushering us into a true multi-chain future. If this thesis plays out, then the assets in this portfolio (some of the biggest Ethereum competitors) will appreciate a lot. This is a riskier portfolio than the ETH portfolio, but I personally believe it to be a better allocation:

$400 of $SOL (Sols are the native gas coins of the Solana blockchain).

$300 of $ATOM (Atoms are the native gas coins of the Cosmos blockchain).

$300 of $AVAX (Avax is the native gas coin of the Avalance blockchain).

Terra-$LUNA: A DeFi Chain for the Future

This final allocation is what I would personally choose, and that’s to invest in the Terra blockchain. Terra is a DeFi-oriented blockchain built around a next-generation algorithmic stablecoin. Without getting too deep into the tech, this blockchain is based on the concept of stablecoins minted in currencies around the world, and its native gas coin $LUNA becomes more valuable as more of Terra’s stablecoins are minted. I believe stablecoins are the most important asset class in crypto, and therefor I believe in this project so much that 100% of my crypto investments are in this blockchain and its products.

$1,000 of $wLUNA.

This is technically an Ethereum-wrapped $LUNA coin which means to actually use it (rather than just hold it and hope for it to appreciate), you’d need to bridge it back to Terra, but at this time, this is the only way to buy $LUNA with USD at US exchanges. If you live outside the US, chances are high that you’ll have access to an exchange that offers $LUNA on its native chain.

If you live in the US and want some extra credit, try to figure out how you can buy native $LUNA directly on Kucoin (a crypto-only exchange that you can use in the US to access a lot of coins you otherwise can’t access at fiat exchanges). Hint: buy a coin on Coinbase Pro that’s cheap to send (like $XLM), send it to Kucoin, and then sell it on Kucoin for a stablecoin to buy $LUNA with.

Some Parting Thoughts

As I wrap this story up, I wanted to leave you with some final thoughts and tips that you should keep in mind as you embark on your crypto journey. These are lessons I’ve learned and some common sense.

1. Don’t keep tons of small positions. A portfolio full of $20 of this, $90 of that, $70 of this, etc. is an anxiety-inducing portfolio. As you continue investing in this space, it’s probably worth making sure that your smallest position never gets to be less than 1% of your total portfolio. So for a $10,000 portfolio, that would be nothing less than $100.
2. Learn about all of the major chains but don’t feel like you need to deep-dive them all. I’m writing another story in this series about all the major blockchains out there today which should give you a good jumping-off point, but at the end of the day, it’s physically impossible to be super knowledgeable about every major chain (let alone smaller chains), and you probably don’t have enough money to meaningfully use multiple chains. Just pick one or two chains to research in more depth. Again, I have yet another story in this series specifically about how I evaluate blockchains as investment opportunities that should help guide you in your deep-dive research.
3. Avoid anyone who talks primarily or only about price. It’s true that crypto can create fantastic wealth from relatively modest beginnings, but anyone who focuses only on price speculation and the next “moon” coin is someone who actually knows very little about crypto technology and is liable to lead you into some bad decisions, or worse even a scam. Like I mentioned earlier, you should get rid of any notions that you’re going to turn $1,000 into $1,000,000 overnight.
4. “Technical Analysis” is a pseudo-science and generally not worth your time. Those who can dedicate most of their time to trading cryptos would make good use from TA, but most people are going to end up making far more money by simply researching and investing in high-quality projects for the long-haul and not having to think about it all the time.
5. Don’t let price changes scare you. In crypto, 20–40% price corrections are very common. Don’t let them scare you into selling at a loss. And if there’s a market-wide correction (aka a bear market), you should keep strong. If you invested in high-quality projects, they will survive a bear market and come out way far ahead in the next bull run.

That’s all for now, cause this story is getting rather long. If you found this story helpful or have follow-up questions, please drop them in the comments for me. I respond to every comment and would be happy to help you with any questions you have.

As I am not a registered fiduciary agent, none of my advice is legally binding in any way, and choosing to follow or not follow it is a responsibility that lies squarely on your shoulders. Crypto is a volatile market, and a significant crash in values is a normal event in this space, just as a significant increase in values is. Treat the market as an irrational actor (which is what it is), buy the proverbial dip when possible, take some profits along the way, and enjoy the ride.