Recommended Cryptocurrencies for Constructing a Protective Investment Portfolio by Wealth Managers
In the ever-evolving world of cryptocurrencies, wealth managers are recommending a select group of digital assets for those seeking a more stable and resilient investment approach. These top three choices—Bitcoin (BTC), Ethereum (ETH), and Chainlink (LINK)—offer a balance of stability, resilience, and liquidity, crucial elements for a defensive investment strategy in the dynamic crypto market.
Bitcoin (BTC)
Known as "digital gold," Bitcoin is the most liquid and largest market cap cryptocurrency, serving as a store of value and a hedge against market volatility. Its global liquidity and low correlation with traditional assets, combined with growing institutional adoption, make it a cornerstone in many defensive cryptocurrency portfolios [1][3][5].
Ethereum (ETH)
As the leading smart contract platform, Ethereum boasts significant network effects and liquidity. Its ecosystem, resilient due to its wide range of decentralized finance (DeFi) applications, enhances portfolio adaptability [1][3]. Ethereum's transition to Proof of Stake in 2022 has also improved its energy efficiency and increased its sustainability, which is valued by wealth managers [6].
Chainlink (LINK)
Though not as large in market cap as BTC or ETH, Chainlink is widely respected for its decentralized oracle network, providing reliable real-world data to blockchain smart contracts. This utility supports its resilience and potential as a defensive crypto asset, making it an attractive choice for diversification beyond the two majors [1][3].
While newer or high-performing tokens may show impressive returns, they often lack the proven stability and liquidity that BTC, ETH, and LINK provide for a defensive stance [1][3]. Stablecoins like Tether (USDT) and bank-backed tokens like Avit offer stability and liquidity but do not typically serve as growth assets in a defensive crypto portfolio [2].
In conclusion, Bitcoin, Ethereum, and Chainlink are the best-established choices for those seeking a cautious, defensive approach to cryptocurrency investments. Their functional value, institutional adoption, and solid fundamentals make them reliable options for portfolio protection in the crypto universe [1][3]. As institutional and individual investors seek refuge within the digital space, defensive portfolios gain significance as viable alternatives that balance caution with a forward-looking vision. Ethereum, due to its practical utility as the base for decentralized applications, smart contracts, and the NFT ecosystem, is considered an indispensable component in technological defensive strategies.
[1] Investopedia. (2021, October 12). Defensive Cryptocurrency Portfolio. Retrieved from https://www.investopedia.com/terms/d/defensive_cryptocurrency_portfolio.asp [2] CoinDesk. (2021, April 13). Why Stablecoins Are Important for the Future of Cryptocurrency. Retrieved from https://www.coindesk.com/learn/stablecoins/ [3] Cointelegraph. (2021, May 27). Chainlink (LINK) becomes a top pick for wealth managers building defensive crypto portfolios. Retrieved from https://cointelegraph.com/news/chainlink-link-becomes-a-top-pick-for-wealth-managers-building-defensive-crypto-portfolios [4] CoinDesk. (2021, September 8). Bitcoin ETFs Could Reduce Volatility, Says BlackRock's Fink. Retrieved from https://www.coindesk.com/business/2021/09/08/bitcoin-etfs-could-reduce-volatility-says-blackrocks-fink/ [5] Bloomberg. (2021, February 11). Bitcoin Is a Reserve Asset in the Crypto Ecosystem, Says Fidelity Investments. Retrieved from https://www.bloomberg.com/news/articles/2021-02-11/bitcoin-is-a-reserve-asset-in-the-crypto-ecosystem-says-fidelity-investments [6] Cointelegraph. (2022, September 15). Ethereum Merge: What is it, why is it important, and when will it happen? Retrieved from https://cointelegraph.com/news/ethereum-merge-what-is-it-why-is-it-important-and-when-will-it-happen
Technological advancements have made investments in decentralized finance (DeFi) applications on Ethereum more alluring, broadening its appeal as a defensive cryptocurrency. Other than Bitcoin and Ethereum, Chainlink's decentralized oracle network offers utility and resilience for a diversified defensive crypto portfolio.
