Reverse Diversification

in SteemLeo •  13 days ago 

There's a misconception when it comes to investing in cryptocurrency that I like to call reverse diversification. If you're like me, you thought it would be a good idea to pick a bunch of promising projects and invest a bit into each one. I didn't put a huge amount of money into ICOs but I'm fairly certain those investments are still down like 90%. Take Golem for example. I bought a few coins (very few) at 72 cents. I saw it crash to 3 just last week.

Yikes.

Diversification is an investing strategy that is supposed to hedge risk going forward. Diversification in the cryptosphere can only open up an investing portfolio to more risk, therefore the only way to accomplish this goal is through "reverse diversification".

What is it?

Essentially it is just Bitcoin maximalism. Want to lower volatility to the minimum amount while still gaining exponential value over time? That's Bitcoin.

What if x coin kills y coin?

There is no scenario where Ethereum succeeds and Bitcoin dies. This is not a competition. This is a symbiotic environment, similar to biological life itself.

When people ask me if Ethereum can "kill" Bitcoin,

I'm sitting there thinking...

Can your heart 'kill' your lungs?

Call me crazy, but I like having all of my organs functioning properly. I don't think there is a secret competition between by gall bladder and pancreas as to which one provides the most value. If I lose a vital organ, they all die. Thankfully, the cryptosphere is a bit more resistant than that.

tentacle monster-steem.jpg

Yes, the cryptosphere is much more similar to some amorphous tumor growing at an exponential rate. Bitcoin and Ethereum are the heart and lungs of the organism. Those are quite necessary. However, then you have networks that are adding clumps of teeth and hair to the tumor and trying to market it like it's magic. Time is the great equalizer.

Conclusion

As you "diversify" to lower market cap networks the implied risk being accepted is increased by a huge margin. The only way to hedge risk in a crypto portfolio is to trade up to higher market cap networks that have proven themselves a bit more in the space. This is why we often see the "altcoins" suffer more during a bull market and investors decide to cut their losses and trade up to granddaddy Bitcoin.

With great risk comes great reward (maybe).

Posted via Steemleo

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I agree too. After 2y bear market Bitcoin still did better than any of the alts.
But for speculation, some alts may give higher profits. I still think that the upside potential of Steem is higher than that of Bitcoin with just 80Mio market cap compared to 187Bio. Besides as all know, the market cap is a totally insufficient metric to compare coins.

Yes I got rekt spreading myself out a bit here and a bit there because everything kinda follows BTC and then some. Almost had to basically restart and cut all losses, literally.

Focusing on to two coins, BTC and steem has turned out to be a pretty good bet so far although I still cling on to some of the other top 10 coins/bags I have, sadly, I can't even get rid of the "violent diarrhoea" coins as they aren't on exchanges any more haha!

Well, I guess I could send them to a different token wallet address...

But yes, focusing on a smaller number works better imo. At least you can keep on top of what's going on

I think your right. I personally did this reverse diversification to limit my loses.

Bitcoin and Ethereum are the heart and lungs of the organism.

Steem is the spleen just doesn’t have the right ring to it.

What out for rectum Ripple .