Diversification in investment is a thief of time and funds, why did I say so ? The time, energy and funds you would have used to develop an investment completely, you'll split it, to other investments, often times it doesn't turn out productive and we end up losing everything.
Many people will adopt a wide-spreading diversified investment strategy, split the funds into many shares, invest a little of all kinds of targets, and pray that several hundred times the currency will be released. But think about it carefully, this kind of dispersion is actually a trap. First of all, the original intention of diversifying investment is to diversify risks, but the correlation of the entire currency market is very high. There are few altcoins that can go out of the independent market relative to Bitcoin. Bitcoin is often rising over other altcoins, altcoins falling and only when Bitcoin rose first and then went sideways, the incremental funds brought by Bitcoin temporarily entered altcoins, and altcoins began to rise. In this case, diversification of investment will not be able to diversify risks, but may increase the risk of stepping on the hole.
Understand the purpose of diversified investment, you know that investing in the currency market is to invest in Bitcoin, because Bitcoin must lead the rise and resist the fall. It is the custom of the entire currency market and the index of the entire currency market. If Bitcoin is not working , Then the entire blockchain industry should give up. When you have a solid Bitcoin bottom position, it basically means that the present value of your Bitcoin bottom position has been magnified by 5 times the cost of opening a position, with a very high flying height, and the amount of funds in the bottom position is relatively high. In terms of all your assets, it already occupies a significant proportion, and then you are qualified to talk about diversified investment. What kind of second target to choose, we must look for those currencies that have a greater probability of outperforming Bitcoin and have the lowest possible correlation with Bitcoin in terms of fundamental business logic, such as UNI. Bitcoin is a store of value and electronic gold, while UNI is a decentralized token exchange protocol, which is a transaction business. These two are far away and are not in the same track at all. And Litecoin is the so-called electronic silver, and it is positioned as the vanguard of Bitcoin, so there is no need to configure it. Unless you are sponsoring the contribution of Litecoin to the pre-test of Bitcoin. Then when you continue to increase the configuration, you must fully consider its low correlation with Bitcoin and UNI, instead of configuring other targets on the same track. For example, if the UNI is already configured, don’t configure other DEXs, and even the entire DeFi track does not need to configure other items, but can focus on other tracks, such as NFT (but I haven’t found a really super high-quality Items worth configuring)?
Second, to diversify investment means to diversify funds. Funds are limited, so we must understand this truth. You have to maximize the efficiency of limited funds within the limited time and space. Diversified investment tends to make you mediocre. Capital efficiency cannot be maximized. You only consider that you will invest a hundred times currency, but you have not thought that the probability of investing in a hundred times currency may only be 1/100, so in fact, your mathematical expectation of casting a net is still 100*1/100=1, which is only 1 times. Of course, if it is a bull market, the boiling of the entire market may greatly increase your chances of hitting a hundred times currency, which creates an illusion that diversified investment is good. Some people split all the funds into 10,000 or 10,000, and find a bunch of projects, each of which invests 8,000, and then a hundred times that is 1 million, which seems to be a particularly good strategy. But it is not. Not to mention dozens of projects, there are more than a dozen projects. For individual independent investors, it is almost impossible for individual investors to have the energy to study all of them, let alone track the progress of the projects and make predictions in advance. Haitou, which is not based on cognition, is to gamble on luck. Everyone is lucky in the bull market, and the beginning of the test is the turning of the bull to the bear.
The underlying logic is that the partial pull of altcoins, where the funds come from, actually comes from the incremental funds brought by Bitcoin. The safest and foolproof strategy is to block the gate of the capital entrance and enjoy the success. How to block the door? The answer is simple, it is to allocate sufficient Bitcoin in advance. Regardless of what happens to the altcoins, the wind will rotate. I will fry DeFi today, NFT tomorrow, and stablecoins the day after tomorrow. I will not move and stand firm on the source of value input, Bitcoin. In this way, lie down comfortably and let others toss. Their tossing will increase my income. This is the strategy that long-term investors should like.
