Cryptocurrencies are a niche when it comes to investing but for most of us dwelling in this part of the webs, it is the only form of investment.
This doesn't mean we shouldn't follow the golden advice of not putting all of your crypto eggs into one basket.
So, here are some ways that we can diversify our portfolio and thus have more chances of long term success.
By Marketcap
Maybe the easiest way and possibly the best strategy. A safer portfolio will be weighted towards "blue-chip" cryptos like Bitcoin and Ethereum, with a good chunk of mid-caps and a smaller group of high-risk low caps.
When the market dumps your big caps will dump less and serve as an anchor to the smaller caps that are dumping harder. When the market pumps the big caps will move slower, but that will be offset by bigger gains in small caps. This is also a risk diversification.
By Industry
Invest in different sectors is logic that would usually apply in the stock markets and it is also applicable in the crypto markets. Choose a couple from each sector or use case... Oracles , DeFi , Privacy Coins, Governance Coins, NFTs, ETH killers etc. This way you have more chances to catch a pumping eeehhhh I mean booming industry and capitalize on the uptrend.
Nasty FIAT
Dollars and euros are still the measuring stick and can add a much-needed touch of diversity for crypto-only investors. You can have Dollars (USDC) lent out earning interest while waiting to invest or put them in a savings account in exchanges like Binance. The yield isn't that great ( 5% - 7% ), but it is better than having them eaten out by inflation in a bank. And whenever you see an opportunity in the market you have some spare cash to invest.
Rewards
We choose some projects for growth but rewards diversification is another thing to consider. When investing in crypto there will be some assets like Bitcoin that offer no rewards aside from growth, whereas others like Polka Dot will provide a steady staking income. The annualized rewards from staking can help juice gains and offset losses from slower-moving coins. Having a few cryptos in your portfolio that offer rewards is a good way to earn income outside of just waiting on the moon to come.
Another example is exchanges like KuCoin or BitMax that share a piece of the fees with the users according to the daily volume and the number of their coins that you stake. This is a great long term strategy and you can profit from both bull and bear markets.
Bitcoin ( and Ethereum )
Bitcoin is the king. It rules the markets, and in many ways serves as something of an index of the market since so much of what happens to altcoins depends on Bitcoin. A strong portfolio will have a good base of Bitcoin since, if we are keeping it real, it is the biggest coin in an entire industry that acts like one big tech stock. And don't forget about Ethereum as its significance rises over the years.
There is life outside crypto
Yes, there is. Remember crypto is still a small market. There are stocks, real estate, business etc. This is likely the real diversification that you need in your portfolio. Crypto is a great asset class, but you essentially have all of your eggs in one basket if you are just in crypto. There are stocks that made gains greater than BTC and of course there are traditional companies like IBM that pay decent dividends over the years. So let’s not think that there is no money to be made in stocks.
Don't over do it
Too much diversification is not good! You can literally own 10 coins and make a killing, you do not need to own dozens of cryptos. With too many coins it becomes nearly impossible to keep track of them all.
You gotta SELL
You have zero profits unless you sell. Don't fell in love with your coins, set a goal, and sell. You will not exactly time the market so take whatever profits you can get and repeat...
Do you diversify your portfolio and how?
I will be happy to read suggestions...
And until all of your coins moon,
Be healthy and smile !!!
PS: images from my canva.com pro account