Investment selection and portfolio formation in the cryptocurrency market

Abstract

The cryptocurrency market stands out as a still poorly regulated market but little by little more and more investors are entering it driven by the desire to earn more from their investments. This market is characterized not only by high expected returns, but also by extremely high risk investments. The article conducts research to help the investor choose a cryptocurrency for investment and what criteria an investor should use before investing in a chosen cryptocurrency. The TOPSIS research method avoids subjectivity and does not require the determination of coefficients of significance of the considered factors. The study and the results showed that bitcoin remains the most optimal cryptocurrency with the least affecting risk factors followed by ether. These two cryptocurrencies should form significant part of an investor’s portfolio, regardless of the type of investor and the level of risk tolerated.