Bitcoin Forum

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When people talk about diversifying your portfolio, they do not mean to sell some of your bitcoin to buy a bunch of shitcoins. (Or, if they do mean that, then they are idiots and you shouldn't follow their advice.)

The entire cryptocurrency market follows bitcoin. When bitcoin goes on a bull run, the market goes on a bull run. When bitcoin dumps, the market dumps. Sure, there is the odd coin here or there which may suddenly double or triples in value over a day or two for no good reason, but selling your bitcoin to buy shitcoins in the hope that you get lucky will result in you losing money 99% of the time. The whole point of diversification is to spread out in to different assets which are not significantly correlated (or even inversely correlated) with each other, so if one tanks, your entire portfolio doesn't tank with it.

You don't diversify your portfolio by buying 20 different oil mining companies, or by buying 20 different precious metals. Similarly, you don't diversify your portfolio by buying 20 different random shitcoins. If you want to use bitcoin as an investment, then that's fine, but it should be part of a balanced portfolio of other non-crypto investments. If you want to take wild punts on random shitcoins, then consider that gambling and not part of any wise investment strategy.

• Diversification within a highly correlated market sector does not provide liquidity neither does it help reduce market volatility. As you mentioned cryptocurrencies are one asset class and contrary to the op, this doesn't make it ideal for all types of investments as majority of the coins are cheap replicas of others, while a lot more are scams.

• You do not need to own multiple coins, much less when you know little or nothing about those other niches, and setting percentages for certain areas just puts you under pressure to buy something for a "diversified portfolio".

How are ethereum and ethereum tokens special, they are all altcoins, or use individual coins in the example. Out of almost 10000 cryptocurrencies that are existing, many of them are scam while many are risky to invest on. I can not say some will not bring profit, but it is better for people to learn very well before investing on any cryptocurrency.

When it comes to diversifying your portfolio to reduce the risks of market volatility, most crypto assets just follow the trajectory of bitcoin. If bitcoin starts dropping so does the majority of altcoins. Although diversification is generally a good idea, most of the time it doesn't do much good in the crypto niche.

One way to prevent losing short-term value is to convert your assets to stablecoins if you believe a significant drop is about to happen. That then opens up other potential problems that are tied to stablecoins like the uncertainty of their future and what they are backed by. Not to mention that most stablecoins are centralized assets (except DAI) that can be locked even if they are in your own personal wallet. Check out mk4's thread PSA: Most Stablecoins Can Be Frozen, Even in Your Own Wallets. (https://bitcointalk.org/index.php?topic=5204055.0)

The only reason you should be diversifying your portfolio in cryptocurrencies is to use a altcoin more like a currency because of the cheaper fees otherwise you should probably have all your budget for cryptocurrencies in Bitcoin. I hate when people say that Bitcoin is too expensive but they do not acknowledge that they do not have to buy 1 Bitcoin to profit. Bitcoin increases and altcoins increase but altcoins do not increase as much as Bitcoin.
This is why I do not trust any altcoin announcements claiming to be the next best thing they all depend on Bitcoin to some extent and they live and die by that sword. I just opened a topic asking participants of bounties that get paid in stakes and why they work for free with the promise of money in the future when the stakes are worthless. I cannot wait for some of the comments and I think a lot of them will be talking about not putting their eggs in one basket and diversifying their investments.....when they are not really doing that and are putting their eggs all in one basket. Cryptocurrency.

Generally, cryptocurrency portfolio diversification reduces the risk But comes out with a lower return compared to the opposite strategy.
Diversifying is a good idea, but doing it in unsystematic way is such a YOLO idea. That's when it becomes very risky.

How does diversifying in other cryptocurrencies reduce the risk compared to just being invested in Bitcoin? As already said by other members in this thread altcoins rely on Bitcoin and if Bitcoin goes on a bull run so do the altcoins. What do you mean by unsystematic way? That makes no sense if we have already established that altcons rely on Bitcoin to an extent. I would say that cryptocurrencies other than Bitcoin have a better chance of failing and diversifying into them will lead to more tears than its worth or at least will not be safer or more profitable than just being invested in Bitcoin.

As long as we haven't seen a real decoupling since 2017, nowadays diversification in cryptocurrencies doesn't make much sense and I understand the maximalists, even when I am not one of them (mostly because of the taxable events the swap would suppose in my country).

Nobody knows when the next decoupling will happen, if ever, so take it easy: you'll have more than enough time to buy altcoins when the next altseason starts, and as in a bear market Bitcoin seems to be more stable than most of them, when the market goes sideways like now, "putting your eggs in the same BTCasket" is not crazy at all. Diversification in crypto, IMO, is only good during bull season.

This is a principle that works in the stock markets, but works opposite in crypto. Bitcoin and Ethereum are the safest of the assets, and the further down you go in market cap the more risk you present. Nearly all alts move with bitcoin still, just with exaggerated upsides and downsides. To say that diversification is safer would imply that some altcoins move differently, but they all really move the same, generally together. There are some times when alts move instead of bitcoin, but in general if you just stuck with BTC or ETH and avoided all other alts you would be much more likely to have consistent gains.

You wrote so much words, yet you didn't describe how to diversify. IMO the optimal strategy is to actually keep everything in Bitcoin, because not only it's the leader of crypto market, it's also technologically the best coin. Diversification makes sense when there are close competitors, but there is no close competitor for Bitcoin. If Bitcoin fails, alts most likely will sink together with it.

If you like to invest in alts and most of your portfolio is alts, then indeed it would be stupid to got all in on one single altcoin, and it's better to choose coins from top 10 for the majority of your portfolio and from top 20 as a smaller part. But investing in alts is in general not as good as investing in Bitcoin. If you look at their prices, all alts tend to heavily lose in their BTC value, meaning BTC outperforms them.

I think it depends on the coins you have, the best among all is bitcoin but there are some altcoins that are still good too, but just that it is good to learn about altcoin and know the best to invest. After bear run, it is not bad to invest in altcoins because they will increase very well during bull run. Try to check the price of Doge, Raven, Zilliqa, Digibyte and some other coins, check their price in the last one year to know what I am talking about. Altcoins are very risky during bear run, but good during bull run. I am suggesting only good altcoin, there are many altcoins that are shitcoins. If someone have 70% of his portfolio on bitcoin and have 30% on altcoins, I do not see it a bad idea.

It is always wrong to look at it as black and white, it is true that all altcoins are less valuable than Bitcoin, but as an investor, in certain times some altcoins achieve a return on investment higher than Bitcoin. If you are a short-term investor, then distributing your investments to some altcoins means more liquidity will flow to focus on buying more Bitcoin, and this is what I mean by diversifying the investment portfolio.

As I explained, I divided these currencies into CLASSES BTC/USD(T,B,C) pair is not linear, and if you have enough cash or withdraw at certain times, you will get more liquidity.



No, any problem with Ethereum (ETH native) means a problem with all ERC-20 tokens and vice versa.
the increase in Ethereum fees means that all other networks will increase in value, which is what happened to BSC.


I divided these currencies into several classes, if you want to diversify your cryptos you must contain some of these categories. Buying Bitcoin, Ether, litcoin, Bitcoin Cash does not mean diversification because they are in the same category.

Even that can be dangerous if we look back what coins were in the TOP 10/20 just a few years ago and where they are now.

- Litecoin used to be a Top 5 coin. It's now in the 13th place.
- Steller is slowly dropping out of the Top 20.
- Monero and EOS have already dropped out.
- I remember that NEO was in the Top 10 a few years ago. It's sitting on #41 today.
- Iota, Dash, DigiByte, Verge have it even worse.

Ethereum and ethereum tokens are altcoins, why did you not just mention the name of the  altcoins and tokens directly, no need to mention altcoins again because ethereum and ethereum tokens are altcoins. You can have your portfolio the way you want it but because this is public, it has to be different. You can begin like this as an example:

1. Bitcoin 70%
2. Ethereum 10%
3. BNB 10%
4. Ethereum tokens and BNB tokens 5%
5. NFTs 5%

No need for altcoins to be included again is what I am saying.

This does not mean, many of these coins increased more than bitcoin if you check the percentage of increase, but they are now falling more than bitcoin during bear run. Some people have Doge, Raven, Zilliqa and Digibyte in their portfolio and become rich by now. Altcoins are more risky but profitable during bull run.

Partly agreed cause I believe there are other coins and projects that worth it to invest with. Yes bitcoin is the leader but as an investor,  I think its also wise to see some opportunity aside from btc itself. Yes there are no close competitor but there are other project out there that can be worth than investing all in on btc.

I have btc and some other alts and I could say that some of my alts are much gain profit than my btc. So i dont think we could say its stupid to invest on alts, cause actual scenario and result are shown that some investment on alts are worth than btc.

This is a good article, haven't clicked so fast on anything in a while XD I have been preaching diversification for a while but to no avail. Diversification is not a new tool when investing, it has always been around with the term 'Don't put all your eggs in one basket :) But it's also a thing that comes when an investor get's more seasoned.

although i am not a big fan of warren buffet, i agree with him on this one. if you really get what bitcoin is, i don't think you should diversify in anything else. and i am not only talking about other "cryptocurrencies", also about other "investments". imo everything else goes to zero compared to bitcoin over a long enough period of time

Exactly this. Go and look at any of the heavily shilled coins from the 2017 ICO craze. Or any of the heavily shilled coins from the IEO/ITO craze. Most of them are dead or dying, down >99% from their peak, little to no ongoing development, no real world use. We can already see the same happening with some of the coins from the ongoing DeFi and NFT crazes. Let's check back in a couple of years and see where we are. I guarantee 99% of these projects will be dead, and bitcoin will still be doing just fine. "Diversifying" in to these coins brings huge amount of additional risks for the 1-in-a-million chance that the shitcoin you bought randomly pumps x10. And even if it does, is it enough to offset all your losses from all the other shitcoins you bought?

Buying any altcoin does not mean diversification because they are all in the same category - cryptocurrencies. Why take the risk with a random altcoin which is far more likely to drop to zero than it is to make any real gains, when you can just stick to bitcoin. If bitcoin dies, your altcoin dies too. If your altcoin dies, bitcoin doesn't care.

With hindsight, you could have got rich by buying and selling Bitconnect at the right time. That doesn't mean it was a good coin, or has good technology behind it, or has a good team behind it, or has ongoing development, or has a real world use, or belongs anywhere near a smart portfolio. Betting on random shitcoins like these is a gamble, not an investment strategy.

Are BNB and ADA going to be around in 5 years time though and if they are are they going to be actively developed or worth anything? The thing with any altcoin is you do not know how good the development team is and how trustworthy the people are behind the coin and most like I would say over 95% of altcoins fail within a couple of years and its usually because of no active development or the team behind it decided to scam.

My point only stands if I'm correct and it would just be speculation from both of us. ADA and BNB might be around in 5 years and might be worth something but just because a project is receiving weekly or even daily updates in the early days does not mean much that is usually what I would call the honeymoon period where the developers are really excited and they think they are going to earn a lot of money and when it comes to two years later and their coin is still worth nothing that is when they drop support and move onto the next idea.

Transparency in cryptocurrencies is very important imo and a coin that is not being transparent will never make it big. I would say transparency is a prerequisite to success in cryptocurrency and that is why the Blockchain is such a big hit among Bitcoin supporters and you can check the very last line of code of Bitcoin and what the developers are adding on a weekly basis if you wanted too.

Of course it's dangerous, it's extremely dangerous in fact. I didn't say that it's safe and foolproof way to make money. But compared to investing in obscure shitcoins, it's safer, because shitcoins from top-1000 and below are even more riskier and have very short lifespans and could crash to nearly zero in a few hours. Which is why I want to stress for newbies again that investing in Bitcoin is both simpler and more profitable. If you chase those stupid x100 pumpcoins, you will get broke from all the dumps, but by holding Bitcoin you will make decent gains in a few years without any effort.

I'm not reading any further, this post sums it up for me, and its something I posted before
about "the current flavour". Altcoins are really temporary, they spend a time being the focus
of attention then to be replaced by a newer project.

I de-diversified my crypto portfolio about 2 years ago I think, almost everything got
liquidated back into Bitcoin.

Diversification as @o_e_l_e_o posted is in many different areas, Crypto, Property, precious metals,
stocks & bonds, Art, Cars, collectables.

Yes, diversification isn't just all about spreading your money into altcoins after you've bought bitcoin. There is also another consideration that you must do.

Just because someone said that you have to diversify then you have to do just as he said. What if that person doesn't have bitcoin and you've got it already and you're in a better situation? sometimes there really is a need to realize and consider first the suggestion of others because you probably are in a better situation than the person that suggests you what you must do.

BNB is not an altcoin/ It's a gambling, and if you like gambling, go to Las Vegas.

ADA and others fall into the same category, so it is better not to invest in a lot of the same category.

I mean tokens, but I added the word smart contracts to fit the content of the article.




Not all of them are in the same category, if we ignore the central nature of stablecoins, they do not take the same approach as Bitcoin.
Some coins take a different approach to Bitcoin in times of stability.

I think that diversified investment in cryptocurrency will not reduce the volatility of the crypto market, nor will it provide liquidity for the currency. Most crypto assets just follow the trajectory of Bitcoin. If the price of Bitcoin rises, altcoins will generally do the same, on the contrary, the price of altcoins will fall with the fall of Bitcoin prices. Therefore, a diversified investment portfolio will not have too much impact to reduce the risk of market volatility.

Encryption portfolio diversification is the act of investing funds in different encryption projects in one or more projects. Implementing a diversification strategy can also help you achieve the best return. It is the best way to reduce risk and avoid the risks we know. Diversification can be a good foundation for providing liquidity and more income, and it can also help reduce the risk of market volatility.

At no point did I suggest that anyone should put all their money in to bitcoin. What I said was that spreading the money you allocate to cryptocurrency among different coins is not diversifying your portfolio.

That article you linked agrees with what I'm saying. It says "Portfolio diversification is the process of investing your money in different asset classes". Altcoins are not a different asset class. They are all cryptocurrencies and they all follow bitcoin, so do nothing to protect your portfolio against a bitcoin bear market.

If you want to buy altcoins to chase some pump and dump profits, then by all means go ahead, but that isn't diversifying - that is gambling. Diversifying your portfolio means investing in different asset classes - stocks, bonds, commodities, real estate, etc.

But let's take a look at the returns on those coins, in terms of BTC:

EOS - down 95% from peak
NEO - down 95% from peak
XLM - down 90% from peak
OMG - down 95% from peak
XRP - down 95% from peak
BCH - down 95% from peak
ARK - down 97% from peak
ZEC - down 98% from peak

Now, we obviously don't know exactly how much of each coin they are holding or when exactly they bought it, but in almost all scenarios buying these coins lost them money compared to buying bitcoin alone and did not reduce the risk of their portfolio compared to buying bitcoin alone. If bitcoin crashes, these altcoins will all crash even more too.

The whole point of diversifying is to reduce your risk of losing too much money if an asset you are heavily invested in crashes. When all altcoins crash together, then buying them does nothing to reduce that risk.

Diversification is a good method. If you put all your eggs in one basket, but it performs poorly, then everything will be affected. The same goes for investing in currencies. If you invest all of your funds in a currency, you have to bear all risks when there are fluctuations. If you choose a variety of investments, you can alleviate the risks at the same time. You must have a deep understanding of the content related to the cryptocurrency you are researching, and pay close attention to the vested interests such as market manipulators.

Investing into the crypto world is a very nice decision to make, but there should also be caution when taking some actions. As said by OP, the main crypto coins in the market which are Bitcoin and Etherium are the top and should be given a more percentage when investing into crypto currency. This is because they are more reliable and the market moves with the effect acting on these two assets. There are other coins out there that has good features too, that is why you'll need to make a personal research so as to have an edge /knowledge on what you are putting your money into.
Diversification is a very use method used in crypto world, the doesn't mean you sell Bitcoin to buy altcoins, it is better to sell other coins to purchase more Bitcoin, cause the value and move of Bitcoin affects the market.
Let's diversify our assets carefully and enjoy our actions later.

Crypto investment is the future of all investment which is the reason why we have the NFT, DeFi and more to come in the future joining the crypto market but every individual need to understand the area they can fill in and the same thing goes for portfolio diversification treated on this thread and just as you said people need to be cautious when taking some actions.
I want every newbie reading this to understand that a portfolio is not easy as people think, it is not for everybody and the last time I check it was only for individuals that have adequate knowledge in portfolio management to avoid excess loss through portfolio diversification.

Every investment tip in crypto has its con and pro.

Although it is impossible to eliminate all risks. It can be adjusted according to the individual's specific investment goals. Diversified investment portfolios and asset allocation are inseparable.

Under normal circumstances, maximizing returns also involves time frame, risk tolerance, and macroeconomic conditions.

The trends of diversified asset classes are often different. Following market conditions, a certain asset may underperform another asset class if it performs well.

I don't think it is necessary to choose different opposing categories in order to achieve diversified portfolio investment, as that may produce poor results.