How do investors diversify their crypto investments?

10 000 question challengeCategory: Profits (trading, ICO, mining)How do investors diversify their crypto investments?
HowToToken Team Staff asked 3 months ago
1 Answers
HowToToken Team Staff answered 3 months ago

Surely, the more investors come to the market, the more strategies of diversification are implemented.

Shanif Dhanani checked 4 most common strategies in his post on Medium:
1. Portfolio that invests 100% of its allocation to the top 20 coins by market cap (similar, but not quite, how his current portfolio was structured).
2. A portfolio that’s evenly weighted across the top 100 coins.
3. A portfolio that’s weighted by market cap across all of the top 100 coins.
4. A portfolio that’s overweight smaller market cap coins — specifically, this portfolio buckets all coins by decile and assigns higher deciles a lower market weight than higher deciles in an almost, but not quite, linear fashion.

His analysis showed that 4th portfolio would have brought highest returns. Does it mean that investors should throw all their money on coins they hear about first time? Definitely not.
Firstly, Dhanani’s period of research included 8 months prior to December, 2017 – actually, the period of strongest growth of cryptomarket in the history. Secondly, the more projects experience large rises the lower are chances you pick a proper one name next time. What if you do not consider 4th strategy and choose between top-20 portfolio and top-100 strategies? Then you better evenly weight your portfolio across all top-100 coins. The analysis showed that this strategy showed more than 3 times higher returns than different strategies.


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