Create Your Own Crypto Basket With This Investment Diversification Method
With blue chip cryptocurrencies like Ethereum and Bitcoin and altcoins like BNB, XRP, and a few others it is hard to compartmentalize your crypto investments. In this article, we will be looking at an investment framework that Boston Consulting Group has used to allocate its funds to the right investment option.
Following is a simple framework to evaluate the costs and benefits of certain investment instruments.
The BCG BOX
In the 1970s Boston Consulting Group formulated a framework called the BCG BOX. This framework was used to assess the company’s portfolio. The four-field matrix distinguishes how much these four types of instruments are beneficial or non-beneficial. Based on its analytical assessment a verdict can be made on the investment.
Following Are the Four Pillars
CASH COWS
These investments have a high market share but a low growth rate. This translates to low but promised returns as compared to other assets. In this case, a wealth manager would advise them to keep milking them. (basically, stay invested, but don’t put all your money here) Currencies like XRP, and SHIBA can be treated as cash cows. (You can check for more such cryptocurrencies on coinmarketcap)
STARS
These options have a high market share and a high growth rate. In this bucket, growth devours money. These currencies are called stars as they have a high potential for an upside. The advisor’s verdict on star cryptocurrencies would be to stay invested and have a stop loss set. The reason that these currencies are called stars is because at the time of investing the overall amount required to get the asset may not be high but the investor has a calculated amount of profit number in mind. Cryptocurrencies like Ethereum and Lido DAO can be added to the STARS bucket.
QUESTION MARKS
These are often cited as problematic child. These investment options have a high growth potential but a low market share (or dominance) These assets are often driven up by shark/whale investors when they buy a huge piece. For example, BTC being added as an investment in institutional portfolios does drive up the price at times. For such cryptocurrencies, it is hard to pass a verdict. However, remember these assets can be brought but one must not expect them to grow overnight. Also, if a certain crypto asset looks like a question mark, invest an amount that you can afford to forget about (subconsciously)
DOGS
This segment talks about assets that are bickering in a saturated market. These DOGS must be held only if you have a slight personal connection with the instrument. For example, it can be an ICO that your friend has. But if you are holding tokens that have slipped down the funnel it is best to liquidate and use the cash flow for other star or cash cow cryptoasset. Currently (in my opinion) the DOG asset that can be liquidated is ALGO as the overall possibility of it turning back into a cash cow or a star seem slim.
Remember
The most dangerous words in investing are ‘this time it’s different.
Sir John Templeton
Personal Note From MEXC Team
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