The crypto space is arguably the vastest digital space in the technology and asset market. Apart from technology and finance, sentiments also set in as a couple of projects exhibit certain ethics which are welcomed by several people. People who get caught in this love spell develop an unconditional love for the project in question and stick to them as a result.
What is your cryptocurrency portfolio looking like? Oh wait; let me guess…two times. A majority of investors will fall amongst the first category, and a tangible more will see themselves in the second category. Of course, every trader falls amongst the first category...most, be on the more correct side.
Love happens many times, naturally. Whatever makes you like a cryptocurrency project can happen all over again, as many times as possible and in different ways. You’d end up investing in a couple of projects. This is you I guess – THE DIVERSIFIER!
A Majority of cryptocurrency investors prefer to split the funds across a couple of crypto assets. Personally, this is me too. For several reasons, a diversified portfolio is a common practice in cryptocurrency. Why pick one when you can get as many as possible? Well, this comes with its demerits; and merits too.
Cryptocurrency is a very risky investment, thanks to its well-pronounced volatility. Values of crypto assets fluctuate over time, in different directions. While this fluctuation is general across crypto assets; the direction of this fluctuation may differ across these assets; most times. A bad day for one project could be a good day for the other. A ‘safety-minded’ investor would spread his capital across a couple of projects and minimize his losses in situations like this. Gains made by one project might be enough to offset the losses incurred by the other project having a bad day. Things stay ‘even’, for now at least.
Several reasons would make an investor diversify. A gamer and a believer in cross-chains will probably put his money on two projects related to this, maybe some AXS and FTM respectively. If you believe in crypto as a portable payment medium, you’d probably add some XRP and nano to your portfolio. This may go on until as long as your cravings and sentiments last.
Apart from personal interest and minimizing risks, certain ethics held up by a project is enough to attract an investor’s attention to the extent of investing in them. Projects with a certain level of decentralization and encouragement for community involvement tend to attract a good number of investors. In contrast; centralized projects are also attractive to some. Whatever serves your taste the most. Investors love to put their money where their mouth is. But this could happen more than once and diversification may come in as a result.
If the last two reasons explain your diversification, then price movements hardly become your focus. However, diversifying to ‘minimize risk’ works most of the time…but certainly not every time. When losses are minimized, profits are also minimized, as a result, pick your poison! I guess you already did as a diversifier.
All right, let me guess again. You are holding just one cryptocurrency asset. Choosing to stay with just one investment amidst tons of enticing projects is a very unique decision, I’m certainly not in this category! Maximalism is a popular culture among early bitcoin investors who believe in the alpha blockchain's extreme superiority and disagree with any related project's importance.
I recently ran into a community of bitcoin maximalists and if you wonder what their perspective could be, take a look at this.
The choice to stick to one project in contrast to diversification is similar to the proverbial ‘putting all eggs in one basket. Could be a move to maximize profits, even though this could get very risky; on the brighter side, a massive success by the project you are solely invested in could blow your portfolio up with gains. The risks are high, but what on earth is not risky? There’s hardly a satisfactory answer to that rhetoric.
Apart from the decision to take the risky side and maximize profits, a very strong belief in a project's use case, ethics, and overall structure breeds maximalist views. Bitcoin and ripple probably hold the highest number of maximalists, but many other ‘good’ projects have investors who are ready to stick with only them till the end. Tough decision I must say. Imagine how it feels to see such a project record a 20% value loss in 24hrs. Cryptocurrency HODLers are arguably the most emotionally-stable humans, but this could burn hands in certain cases.
What’s your portfolio game? Invested in ten projects or invested in one project only? Each with a different feeling and reason for adoption. Share your view, which one are you and why? All eyes are in the comment section!
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