Diversification is crucial in cryptocurrency investment, a volatile and rapidly evolving market. It involves spreading risks by building a varied portfolio rather than concentrating investments.

To diversify, one can include different types of cryptos (Bitcoin, Ethereum, altcoins of various market capitalizations, stablecoins) and different sectors (DeFi, NFT, Layer 1, Layer 2, etc.). Geographical diversification and different storage platforms are also relevant.

The benefits include reducing volatility and specific asset risk, increasing gain opportunities, and better psychological management. However, it does not eliminate all risks, and excessive diversification can complicate tracking. It is an essential strategy for a more resilient crypto portfolio.