Recommended Cryptocurrencies for Constructing a Protective Asset Profile by Wealth Managers
As institutional and retail investors seek refuge within the digital space, defensive portfolios gain significance as viable alternatives. Such portfolios, designed to withstand market fluctuations, are increasingly being recommended by wealth managers.
The top three cryptocurrencies suggested for building a defensive crypto portfolio prioritizing stability, resilience, and liquidity are Bitcoin (BTC), Ethereum (ETH), and Chainlink (LINK).
Bitcoin (BTC)
Bitcoin, the first and foremost cryptocurrency, is widely acknowledged by advisors as a foundational crypto asset. Its first-mover advantage, relative price stability compared to altcoins, and deep liquidity in the market make it an attractive choice. Ric Edelman, a notable advisor, highlights bitcoin’s role in generating higher returns with lower risk over a long horizon, making it core to any crypto allocation.
Ethereum (ETH)
Ethereum, a large-cap asset with strong liquidity, holds a dominant position in decentralized applications (dApps) and DeFi. This resilience amid market volatility and exposure to growth narratives beyond pure store-of-value make it an essential second cornerstone in a diversified crypto portfolio.
Chainlink (LINK)
Chainlink, as a leading decentralized oracle network, offers exposure to crucial infrastructure linking smart contracts to real-world data. Its integration with multiple blockchains helps provide liquidity and stability relative to smaller, more volatile altcoins. Chainlink's strategic alliances, such as the collaboration with Google Cloud, and its constant demand for LINK due to its technical utility make it an appropriate choice for defensive portfolios.
Wealth managers emphasize a defensive crypto portfolio with large-cap assets like BTC and ETH for stability and liquidity, complemented by projects like LINK that provide resilience through utility and infrastructure value. A diversified approach with asset allocation between these cryptos and stablecoins is advised to hedge risk and maintain portfolio durability in volatile crypto markets.
Adopting this approach does not eliminate the inherent volatility of the crypto ecosystem, but it mitigates it. Chainlink's decentralized oracle technology, positioning it as a reliable tool within crypto infrastructure, further enhances the resilience of such a portfolio.
[1] Investopedia. (2021). The Top 3 Cryptocurrencies for a Defensive Portfolio. [online] Available at: https://www.investopedia.com/news/top-3-cryptocurrencies-defensive-portfolio/ [Accessed 16 Mar. 2023].
[3] Forbes. (2021). Why Chainlink Is A Top Pick For Defensive Crypto Portfolio. [online] Available at: https://www.forbes.com/sites/forbestechcouncil/2021/02/04/why-chainlink-is-a-top-pick-for-defensive-crypto-portfolio/?sh=6b7d487a2a4f [Accessed 16 Mar. 2023].
Technology plays a crucial role in the finance sector, as institutions and retail investors increasingly turn to digital spaces, such as blockchain-based platforms for investing. In constructing a defensive crypto portfolio focused on stability, resilience, and liquidity, technology-driven assets like Bitcoin (BTC), Ethereum (ETH), and Chainlink (LINK) are recommended for their proven strength and utility in the crypto market. These digital currencies possess intrinsic value as foundational assets, decentralized application facilitators, and oracle networks, making them attractive investment choices for financially conservative investors. To further minimize risk in volatile crypto markets, a well-diversified approach with judicious allocation of assets among these cryptocurrencies and stablecoins is advised.
