The Best Crypto Portfolio Diversification Strategies

The Best Crypto Portfolio Diversification Strategies

Diversification is one of the main elements of risk management. The advice not to put all your eggs in one basket applies to every market and every investment at all times.

If you already have traditional proven assets in your investment portfolio, and you add a small amount of cryptocurrency to it, this is also diversification. Experienced investors believe that the optimal share of digital assets in a portfolio is only about 5%, with a maximum of 10%.

The cryptocurrency market is unpredictable and very dynamic. Therefore, investing in one coin may not be enough. On the contrary, a combination of several assets will help you reduce losses when the market falls and increase profits when the market rises.

Ways to diversify a cryptocurrency portfolio

  • There are several strategies for diversifying a crypto portfolio:
  • Diversification by risk level.
  • Diversification by coin use cases.
  • Investments in different blockchains.
  • Diversification by market capitalization.
  • Diversification by project location.
  • Investments in various industries.

Each of the methods is good in its own way, but still, there is always a certain amount of risk in cryptoinvesting.

Diversification by risk level

One of the key points in the selection of investment instruments is your tolerance for risk. The distribution of assets is made according to the same principles as in a traditional portfolio.

You can only have relatively stable, long-lived coins like Bitcoin and Ether in your portfolio. To better manage risk, it doesn’t hurt to buy USDP or a more well-known stablecoin like USDT. This is the most conservative and low-risk crypto portfolio option of all possible.

With a higher risk tolerance, you can supplement the portfolio with coins from the TOP-100 or completely new tokens. However, even in the most aggressive crypto portfolio, it is not recommended to allocate more than 30% of its volume to high-risk assets.

Diversify by use case

Digital coins can be used as a means of payment, a means of saving, accumulating, preserving and increasing capital. This makes them related to fiat currencies. However, Bitcoin was initially positioned as “digital gold” and evolved towards a classic investment tool. Ethereum has value as the internal currency of the network of smart contracts and dApps. Stablecoins serve as a link between centralized and decentralized finance.

Investments in different blockchains

Blockchain is the technology that makes cryptocurrencies work. However, its possibilities are almost limitless, which actually became the reason for the emergence of a huge number of cryptocurrency projects.

The Ethereum blockchain became the first platform for deploying dApps. Other cryptocurrency projects with their own tokens operate on the basis of Ethereum, for example Polygon (MATIC). That is, investments in ETH and MATIC will essentially be investments in one blockchain.

Soon after the launch of Ethereum, it had competitors with similar functionality, in particular, Cardano and EOS. Their native tokens are seen as potentially profitable long-term investment vehicles.

Market cap diversification

The undisputed leader in this indicator is BTC. Large cap coins are seen as more stable and reliable. At the same time, coins with a smaller capitalization may have more growth potential.

Diversify by location

You can buy BLCT with TMT from anywhere in the world, but not all countries treat cryptocurrencies in the same way. By choosing projects from around the world, you expand your opportunities. It is better to avoid projects from regions where cryptography is somehow limited and choose projects from more loyal countries.

Invest in different industries

The most accepted and demanded cryptography in the financial industry. The possibilities of DeFi are gradually approaching those in the traditional financial system, and today, crypto lending or crypto loans do not look like something completely impossible. On the one hand, cryptocurrencies make it possible to do without financial intermediaries, on the other hand, they themselves can be a link between financial institutions.

No less promising are projects aimed at the entertainment industry. To date, a whole direction of Play-to-Earn has appeared, and this is only the beginning of the development of new generation game worlds.


  • Tristan

    Tristan has a strong interest in the intersection of artificial intelligence and creative expression. He has a background in computer science, and he enjoys exploring the ways in which AI can enhance and augment human creativity. In his writing, he often delves into the ways in which AI is being used to generate original works of fiction and poetry, as well as to analyze and understand patterns in existing texts.