Diversified investment or concentrated investment ?

Deborah Christine

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Quote from: JensenLim on September 26, 2019, 09:59:54 PM

Hi all, I'm new to Crypto market, would like to ask for the newbie is better to have diversified investment (Ex : 1000 invest to 5 coin , 200 each ) or concentrated investment (1000 invest to 1 coin only ) ? Because I'm thinking that if i split the budget to multiple coin, risk might be low. Huh

Both diversification and concentration all have pluses and minuses. Diversification strategies tend to be a lower risk lower reward, suitable for beginners. The Concentration Strategy tends to be a higher risk higher reward, suitable for experienced traders.

if you are a beginner I suggest you use a diversification strategy because beginners still need a lot to learn, so you should put funds in a few coins. Until you can know which coins are "suitable" for you. When I wa a beginner, I also used diversification strategy.

styca

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Quote from: gentlemand on September 28, 2019, 06:03:22 AM

I think 'diversifying' is a legacy investment fantasy. All of this crap lives and dies in the same market. You won't have a $1000 ETH and a $10 LTC. They're both going to rise in a broadly similar manner.

Similarly I've seen people diversifying by buying coins with different consensus mechanisms as if that's some sort of warranty against doom. Gimme a fuckin break. No one cares about any of that, even fewer understand the difference.

Individual coins can make short term explosions way above normal but they rarely last and there's no way of telling what's going to do it.

If you do want to spread yourself then only put the majority into stuff with muscular volume. If you want to make some wild bets then make sure they're modest.

I'd agree with this, but the main thing for me is their order in marketcap - broadly similar to volume I suppose. High cap stuff is less likely to fall to $0. Equally high cap stuff is unlikely to go x100. The reason high cap is better is that low cap is where the crap lives. There will be some hidden gems down there, but they're often very hidden. If you buy into random low cap stuff, your money is going to disappear.

Crypto is enough of a gamble as it is, don't make it worse for yourself!

Dabs

legendary

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The Concierge of Crypto

Altcoins are a risk. If you know (or even if you didn't know or don't know) you could make some profits through them. In the end, the most stable of them which are not stablecoins would still be Bitcoin.

You can't go much wrong just concentrating on bitcoin. Any other coin is a risk you'll have to study and take, it's possible and it has happened that several altcoins simply do not survive. They have too little active development, or people behind them. Study the coin in question and see how long it has been around. Any coin that is less than 5 years old is risky. They can die. Or if they don't die are on the last page of coinmarketcap, if they are even still on it. Effectively lost money.

I once had an altcoin where I had a billion of it. Can't even find any exchange where you can trade it. The coin itself has no other peers. Dead.

Always a good idea to think what you can afford to lose, as many of these other coins risk going all the way to zero. Priceless. Valueless.

tranthidung

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Farewell o_e_l_e_o

I don't look at dominance of Bitcoin as my most important indicator to decide invest in bitcoin or altcoins. If you exclude bitcoin dominance rate, and only look at volume of bitcoin and some good altcoins, you will see that they are both increasing over last two years.

What does it mean? It means that both bitcoin and good altcoins have become more widely accepted and used globaly. From such things, I see very positive signals of exponential growth for both bitcoin and good altcoins in months or even years to come. At least I expect altcoins will have their good tide from now till the halving day of Bitcoin.

Remember that each crypto currencies have their own customer population, that will play determinant role for their growths. Bitcoin and general condition of crypto market only give extra momentum.

GreatArkansas

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Okay, since you are into 'diversifying' and for sure some of the bags you will fill will definitely an altcoin.

I want you to introduce the Bitcoin Dominance, this means, once the Bitcoin dominance (%) percentage is increasing, you can see the total crypto market cap is favouring on Bitcoin.
If it decreasing, the market cap of Bitcoin is decreasing too and probably some of other coin's market cap is increasing.

Why this is important? Because this will help you to identify (probably on price) if there are many returns if you put your money in Bitcoin or any altcoin.
If you put your money in Bitcoin and the Bitcoin Dominance is increasing, you are safe. But if you put it on altcoins, then it is bad.

(P.S. This is in BTC pairs only or in BTC value only)

Look at the chart now of Bitcoin Dominance, increasing since the start of the year 2019.

evgenia_volkova

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Managing a Portfolio does balance the R:R ratio but, the portfolio creation needs lot of skills. It is not that easy to manage a portfolio if you are new to the market. So, in learning period buying BTC and holding it for long term would be a great idea. Once you start getting a idea on the market trying predicting of the price and note your predictions on a paper or some doc and check how many bets when in profit and how many draw to loss. If profit bets are more then loss then start investing smaller chunk of funds on your portfolio,

bitmover

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bitcoindata.science

Quote from: gentlemand on September 28, 2019, 07:58:55 AM

There are plenty of fundamentally different coins, but putting money in on the basis of their technical merit is pointless. No one cares. There are coins that have been 51% attacked, rolled back, hacked, and they're all still chugging.

The only thing you need to understand is which one will grab the most hype and lets you get out in time and no one knows anything about that either. To 97% or more of people all of these coins are nothing more than three letters attached to number on an exchange that goes up or down.

I think that even those bad projects may somehow contribute. When suffering those 51% attacks we can see how a 51% works, what is can do, like an experiment.

Those shitcoins are, some of them, trying new technologies in a very risk way. If any of those new technologies is useful and it works, it may later on be applied to bitcoin...

Edit: Not saying that it is worth ivnesting in those projects. I am saying that those shitprojects can be good for bitcoin

gentlemand

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Welt Am Draht

Quote from: Velkro on September 28, 2019, 07:21:41 AM

There is only one different coin which is Ethereum. So real question is, do you want invest in Bitcoin and Ethereum and you understand that Bitcoin hold value and Ethereum not because it have whole different design?

There are plenty of fundamentally different coins, but putting money in on the basis of their technical merit is pointless. No one cares. There are coins that have been 51% attacked, rolled back, hacked, and they're all still chugging.

The only thing you need to understand is which one will grab the most hype and lets you get out in time and no one knows anything about that either. To 97% or more of people all of these coins are nothing more than three letters attached to number on an exchange that goes up or down.

Velkro

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Quote from: JensenLim on September 26, 2019, 09:59:54 PM

is better to have diversified investment (Ex : 1000 invest to 5 coin , 200 each ) or concentrated investment (1000 invest to 1 coin only ) ? Because I'm thinking that if i split the budget to multiple coin

First before any investment you must understand in what you are investing. Do you understand technology behind Bitcoin/any other coin? If not, you should, not in great detail but most important details. Then you would realize there is no 5 coins on the market, there is only one which is Bitcoin, all others are copy-paste with name changed. There is only one different coin which is Ethereum. So real question is, do you want invest in Bitcoin and Ethereum and you understand that Bitcoin hold value and Ethereum not because it have whole different design?

Rikafip

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Quote from: bitmover on September 27, 2019, 06:38:16 AM

It makes no sense to "diversify" in assets which are totally correlated. As mentioned above, you will only increase your risk and volatility.

Take a look at this graphic, from coinmarketcap, that I took from this website (https://smartereum.com/1887/ethereum-bitcoin-ripple-cardano-cryptocurrency-prices-going/)

If you look carefully, youi will see that the graphics are all the same, so it makes no sense to diversify here.

Damn, you got me, for a second i thought BTC is back at 11k+ Cheesy

@OP

Makes no sense to diversify unless you are very experienced trader that is doing day trading or some other short term trading. For 99% of the crypto enthusiast, BTC is best and safest bet.You may miss maybe some crazy short term pumps of those alt coins, but you will make it up when things go down, and they will.

So buy some BTC, store it in your hardware wallet and that's it.

gentlemand

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Welt Am Draht

I think 'diversifying' is a legacy investment fantasy. All of this crap lives and dies in the same market. You won't have a $1000 ETH and a $10 LTC. They're both going to rise in a broadly similar manner.

Similarly I've seen people diversifying by buying coins with different consensus mechanisms as if that's some sort of warranty against doom. Gimme a fuckin break. No one cares about any of that, even fewer understand the difference.

Individual coins can make short term explosions way above normal but they rarely last and there's no way of telling what's going to do it.

If you do want to spread yourself then only put the majority into stuff with muscular volume. If you want to make some wild bets then make sure they're modest.

styca

sr. member

Activity: 1078

Merit: 354

Quote from: JensenLim on September 26, 2019, 09:59:54 PM

Hi all, I'm new to Crypto market, would like to ask for the newbie is better to have diversified investment (Ex : 1000 invest to 5 coin , 200 each ) or concentrated investment (1000 invest to 1 coin only ) ? Because I'm thinking that if i split the budget to multiple coin, risk might be low. Huh

I would say start with a small number of different coins. Maybe just bitcoin plus one top alt such as Ethereum. The reason being that it is easier to keep up with news on just a couple of big coins, and you can see how and why the price changes, and get a good idea of when to buy in and when to sell. Once you're comfortable with this, and understand more about how risk increases as you move towards lower cap coins, then maybe expand a bit.

It can be tempting to spread out across a lot of different coins, but it's just too hard to keep up with it all.

bitmover

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bitcoindata.science

Quote from: o_e_l_e_o on September 28, 2019, 04:51:52 AM

Go to the altcoin boards or /r/cryptocurrency and ask all the people there who "diversified" in to a bunch of altcoins back in 2017 how that's working out for them. Bitcoin has recovered from its dip down to $3k, whilst most of the altcoins have only sunk lower.

You don't even need to go that far. Just look up here in the image I posted.
Bitcoin was 11k, Ethereum as 999, XRP was 1.07, Bcash was 1600, Litecoin was 177.

How are the prices now?

Bitcoin is nearly the same, 8200, -27%.
Ethereum is -80%
XRP is -70%
Bcash -90%
Litecoin -70%

Is it worth diversifying is this? If I had never bought any altcoin, my portfolio would be much bigger now.

o_e_l_e_o

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Quote from: bitmover on September 27, 2019, 06:38:16 AM

If you look carefully, youi will see that the graphics are all the same, so it makes no sense to diversify here.

And if you look again, you will see that while everything is in the red, bitcoin remains the least negative out of them all. When bitcoin goes down, all the alts go down harder. If bitcoin goes to zero, all the altcoins will go to zero too, so you aren't reducing your risk at all. Also, when bitcoin goes up, sometimes the alts go up with it, bust just as often they go down even further.

There is zero point in "diversifying" in to alts, as has been mentioned. If you want to diversify your holdings, then look at more traditional investment vehicles - anything from gold to shares to bonds to property. There are a very small number of altcoins (probably less than 5) which have some new useful technology or feature which bitcoin does not, which might be worth looking in to or purchasing from a technical point of view, but there is no point purchasing them from a "reducing your risk" point of view.

Go to the altcoin boards or /r/cryptocurrency and ask all the people there who "diversified" in to a bunch of altcoins back in 2017 how that's working out for them. Bitcoin has recovered from its dip down to $3k, whilst most of the altcoins have only sunk lower.

joniboini

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Quote from: JensenLim on September 26, 2019, 09:59:54 PM

Because I'm thinking that if i split the budget to multiple coin, risk might be low. Huh

This might be true, IF, and only IF, Bitcoin is stable, dominance is not too big, and alts can move freely based on their own 'fundamental values'. But most of the time, that's not the case.

If you want to do that strategy, then you have to enter when alt season starts. But that's really difficult, nobody knows when alts can grow without taking any big hit from Bitcoin. If your funds are limited, hold most of your coins in Bitcoin, and only enter alts when Bitcoin is stable.

pooya87

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it depends on your definition of the term "diversify".
normally to diversify means to invest in multiple "different" and "unrelated" assets so that you can reduce the risk you are taking while still keeping the profit up. when it comes to the cryptocurrency market, unfortunately we don't have any other option than bitcoin. the altcoins are more like penny stocks, so what you call "diversification" would be like buying Apple shares and then buying a couple of dozen penny stocks! that strategy can not be called "diversification". on top of that as @bitmover pointed out, altcoins are in a way linked to bitcoin. whenever bitcoin goes up or down they get dumped so you are not really reducing any risks, what you are doing is to give yourself a false sense of security while maximizing your loss.

tbct_mt2

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When massacre comes, diversification of portfolio, even with good projects does not make sense, as the above image shows. From my time in crypto, not too much, Bitcoin is the King of crypto, and we can not deny altcoin season each year, but if we look at the whole year period, over years so far, investment in Bitcoin will always be the best. Altcoin market is more diffcult to forecast, and when bearish market comes, altcoins usually fall more dramatically compared to Bitcoin. What we witnessed in 2018 and three quarters this year prove that fact.

bitmover

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bitcoindata.science

It makes no sense to "diversify" in assets which are totally correlated. As mentioned above, you will only increase your risk and volatility.

Take a look at this graphic, from coinmarketcap, that I took from this website (https://smartereum.com/1887/ethereum-bitcoin-ripple-cardano-cryptocurrency-prices-going/)

If you look carefully, youi will see that the graphics are all the same, so it makes no sense to diversify here.

CryptopreneurBrainboss

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eXch.cx - Automatic crypto Swap Exchange.

To my understanding, the diversifying strategy works better with different investment vehicle e.g investing in real estate, precious metals, cryptocurrency, stock etc. Investing in multiple altcoins with the mindset of diversifying is just like hiding your money at different locations in your house with the mindset of keeping them safe. What then happen if your home catches on fire just like when the cryptocurrency market experience bear market. In the house example, you lose all your money while in the bear market example you're be at lost, so then, what was the point of diversifying in that manner in the first place?.

There are other investment vehicles out there so, do as @mjglqw have suggested. When diversifying, invest in a manner your investment in one vehicle won't be affected the moment the other investment choices aren't doing so well. Cryptocurrency as an industry is one investment vehicle.

Alluro

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Crypto investments have high risks right now. If you can put your money on risk, you can make your investment with the crypto market. If you are want to invest, don't put your all money in one coin. You can go with a few coins. First of all, you have to learn about crypto market with fundamental analysis and technical analysis before invest. Because of you're a beginner to the crypto market. That's why knowledge is important.

Topic: Diversified investment or concentrated investment ? (Read 348 times)