The thing with crypto currency is that they're all effectively the same thing at the very basic level... Ie. "Imaginery internet money"
So, by holding various coins/tokens, you are not truly diversifying... Like you would if you held tech stocks, oil stocks, gold stocks & pharmaceutical stocks etc... if there is issues with oil, it likely won't affect tech or gold or pharmaceutical etc...
But with cryptocurrency, you effectively just hold a lot of "crypto stock"... Thus, when something "bad" happens in cryptoland, like a country banning crypto trading for instance, you tend to find the entire sector suffers.
Having said that, it is still possible to diversify within crypto to a certain extent, particularly in the case of different "tech"... such that an issue with ETH (massive hack) may not negatively affect BTC... And a contentious BTC fork may not negatively affect ETH etc...
Just do your due diligence, research the tech behind a coin... Avoid HYIPs... Don't buy into hype... And, of course, the golden rule "don't invest what you can't afford to lose".