Why Do Crypto Investors Need To Diversify, Too?

We all are quite aware of the phrase, “Never put all your eggs in a single basket.” They say it because in case anything happens with the basket, all your eggs will be wasted. So, instead of putting all your eggs in a single basket, divide them and put them in different baskets.

In case you drop one basket, you will lose a few of the eggs. Still, you will have the others that you have kept in other baskets. This is one of the major and intelligent strategies when it comes to Crypto investments.

As per the experienced Crypto investors, you should diversify your investment amount in different Cryptos in order to get a better return. The reason might be understandable to some of you.

On the other hand, you might think that when Bitcoin is performing really well, it will be an intelligent choice to invest as much as you can particularly in Bitcoin. But experts never recommend that. Here we will discuss “why?”

Why Do Crypto Investors Need To Diversify

The main benefit of diversifying your Crypto investment is protecting them from risk. Yes, it is true that eliminating the risk of Crypto is nearly impossible. But when you diversify your Crypto assets, you are getting benefited from the passive income of stable coins.

Plus you are also reducing the impact of volatility in a single asset that will affect your portfolio as a whole. So, ultimately it is minimizing the risk of permanent loss, as in case any one of your assets crashes, the rest of your assets will be performing differently at that particular point in time.

So, upto a certain level, you are minimizing your risk factors while diversifying your Crypto investments. As a result, you are increasing your chances of getting more returns over time.

Top Crypto Diversification Strategies

Now, you know why it is always advised to diversify your Crypto investment. Now we will also guide you with the process; that is how. However, crypto genisus is always there for guiding you on Crypto investment.

Knowing these tactics will help you in making firmer decisions on Crypto investments and diversification of your Crypto portfolio.

1. Diversifying By Industry

Just the way you invest in stocks from different sectors for protecting yourself in case one sector takes a hit. You also can apply that strategy here in your Crypto investment. Diversify your investment in Cryptos from different industries.

Here is a list of some of the major industries with considerable Crypto projects.

●  Energy.
●  Supply chain.
●  Medicine.
●  Decentralized finance.
●  Finance.
●  Identity.
●  Data and analytics.
●  AI or Artificial Intelligence.

Regional diversification, which means Crypto projects from different regions of the world, is also an excellent way of diversifying.

2. Diversifying The Type Of Cryptocurrency

There are a huge number of options when it comes to Cryptocurrencies. So, instead of putting all your money in a single Cryptocurrency project, you can diversify your investment in several Cryptocurrencies.

It does not mean you will just select a random coin and invest 20% of your total investment amount there. You have to consider some essential factors for selecting the right Cryptocurrency to invest in.

3. Time Diversification

We hope you get this point from the very name itself. Time diversification implies “investing over time”. You might also have heard the term “dollar-cost averaging,” both of them are the same. Suppose you have $40,000 to invest. Instead of investing the whole amount at once, you can think of investing $1,000 to $4,000 on a monthly basis.

This automatically lowers the risk of having to time perfectly the market for making the best return. Time the market is an effective strategy in the investment sector, but it also comes with its own risk. So, if you want to avoid the risk, you should think of time diversifying.

Diversify Your Crypto Investment

When you are strategizing your Crypto investment and developing a proper planning point-wise, do not forget to include diversification. As we have discussed in this article, it has the potential to offer you higher returns by lowering the investment risks upto a certain level. However, always remember, there is no strategy that will eliminate the risk of Crypto investment.

More Resources:

0 0 votes
Article Rating
Subscribe
Notify of
guest
0 Comments
Inline Feedbacks
View all comments
0
Would love your thoughts, please comment.x
()
x