Cryptocurrency use by residents in the United Arab Emirates is high. According to a recent survey conducted by Laser Digital, the majority of professional investors in the Middle East recognize digital assets as a significant part of the investment landscape. Approximately 93 percent of respondents from the Middle East view digital assets as an opportunity to diversify their investment portfolios alongside traditional asset classes such as fixed income, cash, equities, and commodities.
Crypto Asset Management
Crypto asset management is simply about how crypto asset management companies manage their clients’ digital assets, such as crypto assets or tokens. It is common knowledge that the cryptocurrency market is volatile. With the market’s volatility, even if you have a sound strategy, without proper fund management, you can incur major losses.
Crypto asset management companies help you diversify your portfolios, manage risks, track your crypto asset’s performance, and access comprehensive reports. Moreover, they can help make the crypto market more accessible via professionally managed digital asset products.
Cryptocurrency Portfolio Diversification in UAE
Portfolio diversification is a popular investment strategy. The idea behind this term is to spread investments across different assets with the goal of reducing losses. This strategy protects your portfolio and risk-adjusted returns. These assets include cryptocurrencies, stocks, ETFs, bonds, etc.
Cryptocurrencies are a very popular investment class in the UAE. According to a survey by UAE-based International Financial Group, residents in the UAE are equally inclined to choose cryptocurrencies over mutual funds.
The survey, which had over 1,000 UAE residents in 2023, showed that 10% of respondents see cryptocurrencies as an option for earning inflation-resistant funds. Mutual funds were also about 10%. Exchange-traded funds (ETFs) ranked slightly lower at 9%. Interestingly, cryptocurrencies are popular with younger demographics, particularly individuals aged 18-24.
Cryptocurrency portfolio diversification spreads investment risks among diverse cryptocurrencies. It allows investors and crypto holders to benefit from the stability of high-cap coins such as Bitcoin and Ethereum and the growth potential of mid- to low-cap coins.
Cryptocurrency Portfolio Diversification Strategies in UAE
Allocation Across Asset Classes
As a crypto investor, you should diversify beyond cryptocurrencies by allocating a portion of the portfolio to other asset classes, such as traditional stocks, bonds, real estate, and commodities. This helps reduce overall portfolio volatility and provides exposure to different market cycles.
Invest in Stablecoins and Fiat Currencies
It is helpful to include stablecoins in the portfolio to mitigate volatility risk. Stablecoins are cryptocurrencies pegged to the value of fiat currencies like the US dollar. Stablecoins holders enjoy benefits such as fast and low-cost transactions and price stability.
Geographic Diversification
It is ideal to invest in cryptocurrencies from places other than the UAE. Cryptocurrencies from different geographic regions help diversify regulatory and geopolitical risks. While the UAE provides a favorable regulatory environment for cryptocurrencies, exposure to global markets can help hedge against local regulatory changes or geopolitical events.
Sector Diversification
Diversify across different sectors within the cryptocurrency ecosystem, such as decentralized finance (DeFi), non-fungible tokens (NFTs) and gaming. Each sector have unique growth drivers and risk factors. This exposes you to different opportunities.
Final Words
The UAE is one of the friendly crypto countries. Many residents are massively choosing these digital assets as a means of investment over other asset classes.
