Information is the bedrock of sound investment strategy – but in the volatile world of digital assets, that bedrock can feel more like quicksand. Fortunately, the sector now offers a more comprehensive set of software solutions that can help make this shaky ground feel firmer.
Outsiders may still perceive the cryptocurrency in terms of Bitcoin prices, but anyone who has even dipped a toe in this dynamic market quickly realizes two things. First, BTC is just one of literally thousands of opportunities, and second, simply obtaining an accurate overview of that ever-changing landscape is often a mighty challenge indeed. In fact, even monitoring a single portfolio in real-time cannot be done effectively with a simple spreadsheet. Portfolio managers who want to get the most out of their crypto investments and retain credibility in front of clients will require an integrated portfolio management system with reporting capabilities.
Effective decision making relies on knowledge. Admittedly, nobody can know what is going to happen next in the fast-moving world of crypto; but fund managers need to know at least what has already happened to their investments, and what is happening right now in the broader market. At best, they want to know what bigger, smarter investors are doing or planning – because that will move the market, and because they could do a lot worse than to learn from them.
There are many available sources of information, but keeping an eye on all of them is a major headache.
In conventional markets, tracking multiple assets is fairly straightforward. From equities to commodities, trading is handled on centralized exchanges with set business hours. A stock listed on the London Stock Exchange has one price, which is fixed by the close of trading every day. But a single crypto asset may be traded across hundreds of exchanges worldwide, 24 hours a day, and can be exceptionally volatile.
Volatility is not only the result of the constant ongoing price developments; it is also because crypto is considered a high-risk asset and the market is easily swayed by news, whether macroeconomic developments or industry-specific events. One stark example was in March 2020, when the impact of the Covid-19 pandemic was playing out in the global markets. BTC lost around half of its value in just two days, while other major assets such as ETH and XRP also dropped around 40 percent.
Dramatic events like these illustrate how trends can form and gain momentum exceptionally fast – especially on the downside. This makes real-time price monitoring critically important.
One more factor is the need to diversify. Because of crypto’s high risk weighting, diversification takes on even more importance; and that applies not only to the tokens themselves, but also the exchanges on which they are traded. It is usually necessary to hold some cryptocurrency in an exchange wallet to perform trades, and history has unfortunately shown that crypto exchanges, even the best, cannot be entirely relied on. Besides the risk of hacking or exchange default, it is possible for the exchange infrastructure to become overwhelmed at times of high trading activity, in which case traders may be caught up in a bottleneck and unable to take action at exactly the time when they need to.
Due to the risks involved, institutional infrastructure now includes a more sophisticated stack involving custody providers and brokerage services integrated with order and execution management systems. Furthermore, many professional and institutional strategies now incorporate the use of high-frequency trading.
Thus, while spreading investment activity across multiple exchanges is the best way to forestall counterparty risk, it adds to the burden of monitoring digital asset holdings. A portfolio manager may need to maintain an overview of their accounts across half a dozen or more exchanges, wallets, or custody providers; and all in real time, while prices are constantly moving 24/7. The only practical way to manage this is with specialized software.
Crypto portfolio trackers have emerged to provide a simple solution to the pressing problem of much-needed portfolio overview, while enabling data analytics for investors in the complex and fast-moving digital asset market. Active cryptocurrency portfolio management demands high-quality information, and trackers are the best way to achieve this.
A portfolio tracker connects different sources of information – multiple exchanges and wallets – to present the current standing of each in a unified, easy-to-read interface. It can show not only the balances of each asset, but their market value according to live prices, as well as valuable metrics such as risk weighting and exposure. Some crypto portfolio trackers may also accommodate non-crypto assets (such as equities) to provide a truly all-in-one portfolio management system.
Obtaining a complete overview will help investors assess their portfolio’s performance from a holistic perspective and ensure that they maintain the optimal risk-return balance, as well as enabling them to identify market trends quickly and so respond in good time.
Even better, good portfolio management systems can offer added value in the form of crypto data analytics and automations to guide decision making for better returns. This will be particularly valuable for traders following a strategy based on technical analysis.
On-chain analysis has become a must-have tool to help make sense of some of the specific complexities of the digital asset markets. On-chain analysis can yield information about the network health of a crypto asset using metrics like transaction volumes, new coin issuance, or miner revenues. It can also offer insights into buyer and seller behavior, by examining the length of time investors are holding assets.
Another unique feature adding to crypto market complexity is decentralized finance. All DeFi transactions take place on-chain, offering innate transparency and a vast amount of insight into market activity: where is liquidity building up, where are tokens being moved in and out of wallets.
All this crypto data requires careful interpretation, but it can be very telling. Seeing the relative prominence of stablecoins in trading, for instance, can suggest the prevailing market appetite for risk. Large exchange outflows or inflows are also a strong indicator of trading pressure. And observing the activities of particularly large wallets, or those with a history of profitable trading, can be a useful guide. Incorporating this information and analysis into a portfolio tracker puts extra power in the hands of the investor.
Given the importance of crypto portfolio monitoring, it is important to choose the right tool. Every package on the market will tout usability and power – but what features should investors be seeking?
Ironclad security. That means strong encryption, two-factor authentication, and not giving the app access to exchange account credentials. Any tool with full investor dashboard functionality – that is, the capability to execute trades, whether manually or through automations – should be handled with extreme caution and held to a far higher security standard.
Integration with multiple platforms. Make sure that the tracker connects with not only every exchange and wallet used in the current portfolio set, but also a good number of other reputable platforms, to support future needs.
Regular, automatic syncing. Manually adding or importing transactions can be an enormous drain on resources in an actively managed portfolio, and introduces a potential locus for errors.
Live and meaningful price updates. The tracker should display up-to-the-minute prices for every asset in the portfolio, expressed in a choice of currencies (whether fiat or crypto). Of course this is particularly important for any tool that integrates traditional as well as digital asset holdings: without fiat valuations for digital assets, it is not possible to assess the overall asset allocation.
It should also be clear how price data is sourced, since trackers that source price data from a single exchange could be vulnerable, if the markets on that exchange are manipulated or a large, unexpected transaction creates volatility. The most reliable price trackers aggregate and weight prices across multiple platforms to achieve a meaningful average.
User-friendly interface. The whole point of a crypto portfolio tracker is to bring together the necessary market information to support better decision making. Bad UX will not serve these goals. It is crucial that the tool should have a streamlined design and put necessary actions at the user’s fingertips; otherwise it just adds to their confusion.
Clear visualizations. Along the same lines, access to detailed data is not enough – it needs to be presented in a way that can be easily interpreted. For most traders, the priority will be fully customizable charts, including candle charts as well as line graphs.
Beyond these basics, there are a number of features that will add significant value.
Integration with EVM-compatible wallets. For DeFi investors, syncing with MetaMask, Ledger and the like will be a key feature.
Extended metrics on portfolio assets. Tracking the price of holdings is the bare minimum – deeper data puts it all in context. Metrics to look for include reference prices, volume, volatility, mining statistics, market capitalization and sector.
Portfolio performance at a glance. Rolling profit/loss and break-even points displayed for the entire portfolio, as well as for each asset, help to keep a clear overview.
Automated data analytics. Automated insights based on these metrics, and wider market data, can be a great help in developing a winning investment strategy, not to mention pursuing technically driven trading.
Custom crypto analytics. More advanced and professional investors will need more advanced tools, so that they can create, backtest and implement custom models according to their own strategies. It should also be possible to integrate third-party data into the tracker for the most powerful crypto market analysis.
Market overview and trend charts. Investors will want to keep an eye on broader market developments, and benchmark their holdings against other assets. A good tracker should enable the user to access this data easily and fine-tune the display as needed. Features such as sentiment analysis and social media aggregators can be a valuable addition.
Asset watchlist. Again, watching the price movements for benchmark assets is a useful comparison, but it also enables investors to optimize their trade timing. Automated alerts if a certain price is reached can also be helpful.
Detailed trade analysis. Automated crypto analysis tools should drill into the level of of individual trades, including detailed order execution. This is another way that crypto portfolio tracking software can help investors to assess and adapt their strategy to generate the best returns.
Tax reporting. Tax requirements will vary enormously in different countries, but a tool that makes it easy to generate capital gains (or losses) as well as income statements for any financial period can be a big help.
Market news and educational resources. While it is not necessary to access crypto news on the same platform as portfolio and market data, it could certainly be a useful bonus. Direct links to whitepapers and/or project documentation is also a distinct advantage in researching opportunities.
Trading bots. Some trackers may offer bots to assist high-volume traders with automated transactions following a defined strategy. The automations could be geared towards portfolio rebalancing, for instance, or reacting quickly to price movements, or dollar-cost averaging. While these are undoubtedly useful, as previously mentioned, any app that can send instructions to the exchange carries extra security risks. As such, if considering such a tool, make sure that it carries the highest security credentials.
Emerging AI tools. Tools such as ChatGPT have gained viral popularity over recent months, leading to a vast array of use cases being showcased on social media. While ChatGPT queries could be used to generate digital asset research, the reliability of results is still frequently called into question, and therefore these tools cannot yet be relied upon to avoid the effort of effective due diligence.
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https://www.cointree.com/learn/the-three-types-of-cryptocurrency-analysis/
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https://www.nansen.ai/guides/what-is-on-chain-analysis-and-why-is-it-useful-for-crypto-traders
Nuant, (2022), “Why on-chain data analysis has become a “must-have” for crypto funds.” Accessed at: https://www.nuant.com/research/why-on-chain-data-analysis-has-become-a-must-have-for-crypto-funds
Rodriguez, Jesus (2020), “Four Insights about Centralized Exchanges You Can Gather By Analyzing On-Chain Flow Data”. Accessed at:
https://medium.com/intotheblock/four-insights-about-centralized-exchanges-you-can-gather-by-analyzing-on-chain-flow-data-82f9f9603bdd
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Swapzone (2022), “Top 16 Crypto Trading Tools and Resources for Analysis”. Accessed at:https://medium.com/coinmonks/top-16-crypto-trading-tools-and-resources-for-analysis-53fbf09f8c1d
