Crypto Portfolio Diversification: Just Relax, My Boss!

Hello cryptoenthusiast ( or those who want to become a cryptoenthusiast )! Have you ever heard the saying “don’t put all your eggs in one basket”? Well, this is the essence of portfolio diversification, including in the crypto world that can sometimes make you feel nervous. Don’t worry about complicated terms, let’s discuss it casually, okay?

Why Should We Diversify?

Imagine this, you have money and buy everything into one crypto coin, for example Bitcoin ($BTC). The next day, the price of BTC suddenly drops 30%. Wow, wouldn’t that panic you? You’d definitely panic! But if you also have other coins, like Ethereum ($$ETH), Solana ($$SOL), or even stablecoins like USDT, the drop in BTC won’t make your wallet cry alone. Other coins might not drop as severely, or even increase.

That’s the purpose of diversification: to reduce risk. So, if one asset crashes, there is another asset that can support or even provide profit. It’s like you have several money-making machines, so if one breaks down, the others are still running.

How to Diversify Simply for Beginners?

Okay, let’s get straight to the practice. You don’t need to be an economics expert or an experienced trader to start diversifying. Here are some methods you can try:

1. Don’t Just Have One Coin

This is the most basic point. If you only have BTC, try looking at other coins that have potential. Ethereum (ETH) is a very popular choice due to its large ecosystem. Solana (SOL), Avalanche (AVAX), or Cardano (ADA) are also often interesting choices.

2. Consider Market Capitalization

Market capitalization (market cap) is like a measure of the “weight” of a coin. Coins with large market capitalization (such as BTC and ETH) tend to be more stable and have lower risks compared to coins with small market capitalization (commonly referred to as small altcoins).

Tips: You can allocate most of your funds to large-cap coins, then a small portion to “younger” altcoins with high potential. For example, 60-70% in BTC/ETH, the rest in other altcoins.

3. Understand the Categories (DeFi, GameFi, NFT, etc.)

The crypto world is really vast. There are coins focused on decentralized finance (DeFi), some on gaming (GameFi), some on NFTs, and so on. Try picking a few coins from different categories. If one category is sluggish, another category can still be revving up.

Example: Have ETH ( platform smart contract ), then take LINK ( oracle for DeFi ), or AXS ( GameFi ). This can be an example of category diversification.

4. Don’t Forget Stablecoin

Stablecoin is a coin whose value is pegged to stable assets, usually the US Dollar (examples: USDT, USDC, BUSD). Why is it important? If the crypto market is in a bearish phase (continuously dropping), you can temporarily “park” your funds in stablecoin. So, its value won’t plummet. This is very important to keep your capital from depleting when the market is not friendly.

5. Adjust to Your Investment Goals

Want to invest for the long term? Maybe focus more on blue-chip coins like BTC and ETH. Want to try to make quick profits (but with higher risks)? Perhaps you can look at altcoins with smaller market capitalization, but still with a measured portion and thorough research.

Remember, This Is Not Financial Advice!

This is very important: everything I say here is not professional financial advice. The main goal is to share information so that you have an overview. Always do your own research (DYOR - Do Your Own Research) before deciding to buy any coins. Understand the project, the team behind it, and the potential moving forward.

Closing: Relax But Stay Alert!

Diversification is the key to sleeping better in this volatile crypto world. There’s no need to rush, just start slowly, try to allocate your funds to several different coins, and don’t forget to always learn. Remember, crypto is a high-risk investment, so invest money that you are ready to lose!

I hope this article helps you beginners to better understand the importance of diversification in the world of crypto. Are there any other questions you’d like to discuss? Don’t hesitate to ask!