Allocation
Allocation in crypto refers to the strategic distribution of investments across different cryptocurrencies and asset types to manage risk and optimize returns in a diversified portfolio.
Kacper Tomasiak
Web & SEO Manager at Swapped.com
Allocation in crypto is like deciding how to divide your money between different cryptocurrencies and investment types. Just like you might put some money in a savings account, some in stocks, and keep some cash on hand, crypto allocation means choosing how much to put into Bitcoin, Ethereum, smaller altcoins, and other crypto investments.
Think of allocation as your investment recipe. A baker doesn't use only flour to make bread—they mix flour, water, yeast, and other ingredients in specific amounts. Similarly, smart crypto investors don't put all their money into just Bitcoin or just one altcoin.
What Does Allocation Mean?
Allocation refers to how you distribute your investment money across different assets or categories. In the crypto world, this means deciding what percentage of your money goes into different cryptocurrencies, DeFi projects, NFTs, or keeping some in traditional investments outside of crypto.
For example, a beginner might allocate their crypto investments like this: 50% Bitcoin, 30% Ethereum, and 20% split between three smaller altcoins. This spread helps reduce risk because if one cryptocurrency drops in value, the others might stay stable or even go up.
The concept extends beyond just picking different coins. Allocation also includes deciding how much of your total savings should go into crypto versus traditional investments like stocks, bonds, or keeping money in your regular bank account.
Balance risk and reward by diversifying across crypto assets.
Types of Crypto Allocation
The crypto space uses allocation in several distinct ways, each serving different purposes for investors and projects alike.
Portfolio Allocation
Portfolio allocation is probably the most relevant type for everyday crypto investors. This means deciding what percentage of your total crypto investment should go into different cryptocurrencies.
For example, you might decide to allocate 60% of your crypto portfolio to Bitcoin, 25% to Ethereum, and 15% to smaller altcoins like Solana or Cardano. This strategy helps spread risk across multiple assets rather than putting all your money into one cryptocurrency.
Many experienced investors follow allocation strategies similar to traditional finance. A conservative investor might allocate 80% to established cryptocurrencies like Bitcoin and Ethereum, while reserving 20% for newer, higher-risk projects with greater growth potential.
Token Allocation by Projects
When new cryptocurrency projects launch, they must decide how to distribute their total token supply. This process, called token allocation, determines who receives tokens and in what quantities.
A typical crypto project might allocate their tokens like this: 40% for public sales to regular investors, 20% for the founding team, 15% for early private investors, 10% for marketing and partnerships, 10% for the project treasury, and 5% for advisors.
These allocations are usually clearly outlined in a project's whitepaper or tokenomics documentation. Understanding how tokens are allocated helps investors evaluate whether a project has a fair distribution or if too many tokens are concentrated among insiders.
Investment Round Allocations
Crypto projects often raise money through multiple investment rounds, each with its own allocation structure. Early investors who take bigger risks typically receive larger allocations at lower prices.
During a private sale round, a project might allocate 1 million tokens to early investors at $0.10 per token. Later, during the public sale, they might allocate 5 million tokens to regular investors at $0.50 per token. Each investor group receives their allocated portion based on when they invested and how much risk they took.
Allocations vary by how tokens are used, invested, or distributed.
Team and Founder Allocations
Most crypto projects reserve a portion of their tokens for team members and founders as compensation for their work. These team allocations often come with vesting schedules, meaning the tokens are released gradually over time rather than all at once.
For instance, a blockchain developer might receive an allocation of 50,000 tokens, but they can only access 25% immediately, with the remaining 75% unlocking monthly over three years. This vesting schedule encourages team members to stay committed to the project's long-term success.
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