"Bitcoin is just the biggest of literally thousands of cryptocurrencies," the founder of BK Capital Management told CNBC's "Fast Money" on Wednesday. "[Cryptocurrency] is a world onto itself. It's its own market. And just like the stock market it has its own organizational structure."
It's a mistake to invest only in bitcoin, thinking that's a sufficient way to play the digital currency market, Kelly said.
That organizational structure includes large-cap, mid-cap and small-cap coins. Larger coins typically have market values above $10 billion, mid-size coins are between $1 billion and $10 billion and smaller coins fall below $1 billion.
"It's not just the size of the coin, but how you use it," said Kelly, who earlier this month said he has invested "like 90 percent" of his money in the cryptomarket.
Different digital coins have different uses, such as payment systems and storage, said Kelly.
Here are Kelly's recommendations for starting a cryptoportfolio, and how much to invest in each area of the diverse market: