"Don't put all your eggs in one basket" is an old and simple proverb, but in the world of cryptocurrencies filled with sharp fluctuations and surprises, it is no longer just advice; it becomes the first rule of survival. Ignoring this rule is the fastest way to lose everything.
Why is this rule critical in crypto specifically?
Because this market is unforgiving. A project that may seem revolutionary today could disappear tomorrow. A currency that may soar could collapse due to a single tweet or a change in regulations. Even the largest projects like Bitcoin and Ethereum experience violent fluctuations. When you put all your capital into one project, you are not investing; you are gambling. You are betting on a single horse in an unpredictable race.
How do you apply this rule correctly? (Smart diversification)
Diversification does not just mean buying 10 different currencies randomly. Smart diversification is distributing your investments across different and quality "baskets," each with its own characteristics and risk level. Here’s how to do it:
1. Distribute based on project size:
The large and relatively safe basket: Allocate the largest part of your portfolio to giant projects with a strong reputation such as Bitcoin (BTC) and Ethereum (ETH). They serve as the solid foundation of your portfolio.
The medium basket (for growth): Allocate a smaller portion to strong and innovative projects that are still in the growth stage. These projects may offer higher returns but come with higher risks.
The small basket (for adventure): Allocate a very small portion (which you can afford to lose entirely) to very new or very high-risk projects, which may yield fantastic returns or fail completely.
2. Distribute based on sector (the most important of all):
Do not buy currencies that all serve the same purpose. Distribute your investments across different sectors within the crypto world, just as you would invest in technology, automotive, and healthcare sectors in the stock market.
1️⃣. Sector of infrastructure: (such as Ethereum, Solana, Cardano)
2️⃣. Sector of decentralized finance (DeFi): (such as Uniswap, Aave)
3️⃣. Sector of gaming and the metaverse: (such as Decentraland, The Sandbox)
4️⃣. Sector of reality-linked digital currencies (Oracles): (such as Chainlink)
In summary:
The goal of diversification is not to achieve fantastic profits from all your investments but to manage risks and protect your capital. If one basket fails, you have other baskets to maintain your balance. Diversification transforms you from a gambler trembling with every market movement into a strategic investor thinking long-term. In the crypto world, those who survive today are the ones who win tomorrow.
