An eternal truism of investment is that a diversified portfolio is a stronger one. The same is true for your cryptocurrency portfolios. While small-scale crypto-traders might be better off sticking to two or three different coins, anyone who is attempting to build a sizeable portfolio should consider branching out.
It is a fact that bitcoin has demonstrated unprecedented volatility since 2017, meaning that putting all of your eggs in one basket is an undeniably risky strategy. Beyond this, let’s take a closer look at why it is essential that you begin diversifying your crypto portfolio today.
You Can’t Count on Bitcoin Alone
As mentioned, bitcoin is no longer a reliable investment on its own, Granted, the currency has experienced a strong rally throughout 2020, largely in response to global economic instability, but history has shown that bitcoin tends to have very short and sudden boom cycles followed by decline and stagnation. Being overly reliant on bitcoin means that your assets are being needlessly exposed to the vulnerabilities of this highly volatile coin. Diversifying your crypto holdings will help you offset some of this considerable risk.
Industry Leaders Are Diversifying
If you’re ever at a loss over which investment decisions to take, simply check what the big league investors are doing. Well-known crypto millionaires such as Barry Silbert, Dan Morehead, and the Winklevoss brothers all have significant investments in coins other than bitcoin, as well as investments in hundreds of different crypto exchanges around the world. All of these investors may have gotten their start during the original bitcoin boom, but have since expanded into other currencies.
Diversification Has Never Been Easier
Another important reason to diversify your crypto holdings today is that it has, quite simply, never been easier to do so. The process of moving your investments around and choosing to invest in multiple cryptocurrencies in an instant is now convenient, user-friendly, and can be done via your mobile device. Thanks to the proliferation of broker platforms for crypto trading that can guarantee safe and speedy investments, there really is no excuse. In addition, such platforms also come with expert analysis and guidance on the latest crypto markets, allowing you to make informed diversification decisions.
Other Coins Are Catching Up
While other coins have had their occasional moments in the sun, bitcoin is still widely viewed as the only game in town. Part of this is to do with the simple fact that none of the other major cryptocurrencies tend to come close to bitcoin in terms of per-coin value. However, the past couple of years has seen the gap between bitcoin and other major cryptocurrencies close like never before. Ethereum (ETH) has seen the highest level of trading activity in years, with its value being pushed up past $350 and continuing to rise. Litecoin has started to gain traction thanks to its high block reward of 25 LTC, which now looks all the more appealing in light of Bitcoin’s recent ‘halving’. BAT, created by the investor of Javascript, is the only cryptocurrency that didn’t collapse in value back in February, suggesting a bright future ahead. The list goes on.
It’s a Volatile World
Finally, it bears repeating that we simply live in a volatile world, where even the most secure and ‘safe’ investments can see their value collapse in the blink of an eye. We have already witnessed a devastating market collapse this year and there is every indication that another one could be on the way. Diversifying your portfolio is a way of hedging your bets and ensuring that you have as many backups and safety nets as possible if things turn sour. On the flip side, a diversified portfolio greatly increases the chance that you will bet on a winner and hit the jackpot.
These are just a few of the reasons why you should consider diversifying your cryptocurrency portfolio today. Think outside the bitcoin box and start exploring new opportunities.
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