Beyond Bitcoin: The Importance of Diversification in Crypto
You should invest in more than one cryptocurrency just like you’d invest in multiple stocks and bonds.
Sometimes we hear the question: Is diversification important in crypto in the same way it is with traditional investing in stocks and bonds?
The short answer is: Yes, diversification is important—you should invest in more than one cryptocurrency just like you’d invest in multiple stocks and bonds.
But let’s expand on this thought.
Diversification beyond Bitcoin and Ethereum
The general goal of diversification is to try and reduce the risk of losses while increasing your expected return. We can do this by making investments in a broad set of assets, limiting exposure to any one holding.
With crypto, we recommend investing in multiple tokens, expanding beyond Bitcoin and Ethereum, to help limit exposure to any single asset. Diversification can give you wider exposure to the growing crypto landscape, including tokens in decentralized finance and the metaverse.
How to diversify in crypto
If you haven’t invested in crypto yet, or have only invested a little in Bitcoin or a small handful of other tokens, we recommend starting small and slow. Here are two tips to get started:
Choose your overall crypto allocation
Think of crypto as a small part of your larger investment strategy—not a one-off investment. Diversification matters within your crypto investment but also across all of your investments. You need to answer the question: how much of my investable assets do I want in crypto? It seems like a big question, but we try to make it easier on you. Our experts recommend no more than a 5% allocation of your total investable assets.
Invest in multiple cryptocurrencies
This one is important. We’re so early in the life span of crypto that picking a few winners from thousands of coins is unlikely—that’s why we offer diversified, expert-curated portfolios with multiple coins that can change over time as the crypto markets evolve.