Last year, Bitcoin traders and owners made a lot of gains as it was at its all-time highs of $19,000. This caused an influx in the Bitcoin arena, as prospective and expert investors went out of their way to purchase more bitcoins in a bid to cash in more. Nevertheless, the glory did not last long as the market cap for bitcoin dropped to around $7000. Even though this price is still quite valuable, those who invested in the last minute underwent massive losses while those who invested earlier still had something to smile about as they had made enough gains way before the bubble burst. Where is all this going? Well, this is to show you that investing in crypto is not always fun and games. The world of crypto is subject to market fluctuations and many other factors which affect the price and curve of the crypto graph. In respect to that, anyone planning to invest should at all times retain a vigilant attitude towards the investment choices he/she makes. One way to do so is by broadening your horizons. If you’re a newbie to the crypto universe, below is how diversifying your portfolio in cryptocurrencies helps you minimize risks giving you an opportunity to join the world of BronzeMarkets earners.
To most investors, making multiple investments in cryptocurrencies might sound insane and ridiculous. However, those who practice this, are sufficient proof that doing so is not only beneficial in the long run, but is also one of the primary ways to meet your long term financial goals without losing your shirt.
Investing in multiple cryptos helps you minimize your exposure to the risk associated with one asset as it helps spread the risks over various investments. Take for instance, a trader who had invested his money on 30% Ethereum, 30% ripple and 40% bitcoin suffered less losses during last year’s bitcoin fall as he/she still had another channel to not only sustain him but also bring him 60% profit in comparison to one who had invested 100% on bitcoin.
There’s no telling which crypto will be dominant in future
Even though there have been numerous advancements in blockchain technology such as smart contracts, the blockchain, and crypto technology is still in its earliest stages. Additionally, they are highly susceptible to market volatility, and no matter how proficient one is, it is impossible to tell which cryptocurrency will become dominant in future. Thus diversifying your portfolio is a wise strategy as it gives you an upper hand on whichever crypto rules the market in the near future. For instance, using the same example above, if in future Ethereum becomes dominant, then the first trader will still have the upper hand and will enjoy more gains while at the same time enjoying the profits made by the other crypto in which he/she owns. The complete opposite will be experienced by a trader who invested solely on bitcoins as they will be forced to sell at a lower price than they bought it at.
Gives you an opportunity to learn about market trends of various crypto
Diversifying your portfolio is not only beneficial in risk management but also helps you increase your knowledge about how various markets work. For instance, investing in bitcoins, Ethereum and ripple make it easy for you to understand the market trends associated with each. Again consider the example above, the first trader could quickly pull out from investing in Bitcoins as it was way much easier to notice the bearish trend exhibited by this crypto thus preventing the imminent losses as he/she was aware of what’s happening in the other crypto markets. On the other hand, it would have been more difficult for the second trader to pull out as he/she was not only unaware of the market trends but was impressed by the rapidly increasing price for bitcoin.
Gives you a place to lean on
Having multiple investments in crypto offers you a leveled ground to bounce back on, once one of your investments goes down the drain. Take the example above, the trader who had invested 100% in bitcoin was not only left counting losses but also at a sunken place as he/she had no backup plan. However, one who had invested in multiple cryptos had other investments which he/she could use as backup before the market for bitcoin stabilized.
In a nutshell
Diversifying your portfolio in crypto is the way to go if you are looking to maximize on the profits, achieve your long-term financial goals and at the same time manage the risks associated with cryptocurrencies.