Topic: Is diversification into different coins really a good advice for Newbies? - page 2. (Read 1400 times)

Correction:
You got lucky that other but similar shitcoins that you didn't choose got dumped instead.

There really isn't any difference between one centralized shitcoin and other centralized shitcoin. It just happened that the model they were using fell apart this time while others didn't but could fall apart next time!

Exactly, like o_e_l_e_o brought some examples already from historic coinmarketcap. In general, Altcoins tend to lose attention after they were "famous" because a new "better" altcoin is presented.

Most famous Altcoins of 2017 / 2018 didn't even set a new all-time-high again in 2021 / 2022:

Coin	ATH 2017 / 2018	ATH 2021 / 2022
__________________	_______________________	_______________________
EOS	22$	15$
Ripple	3.50$	2.00$
Tron	0.225$	0.16$
BCH	3,800$	1,500$
Stellar	0.90$	0.73$
Bitcoin	19,600$	65,000$

---

Please don't remind me.  
The bear market is killing all my nominated Shitcoins.
Looks like your pick wasn't bad at all.
In case of a bear market = almost a safe bet for you to win because all Altcoins would drop but stablecoins remain stable*.
In case of a bull market = very low chance for Stablecoins for a win.
But since everyone nominated volatile Shitcoins, the bull market lane was packed.

*And you made a good choice by avoiding Terra USD.  

One of the tricky things to consider is that even though Bitcoin's market cap has been falling for a while, that doesn't mean individual altcoins gained market cap. There's a continuous inflow of newly created money grabbing schemes altcoins that follow the old pump and dump scheme. The top 10 places are of course filled with other altcoins, and that's why people keep jumping in. Until it implodes and is repeated in the next one. Some people earn a lot of money, most people lose a lot. I still often see top 50 altcoins that are worth (tens of) billions, and have only been created a couple of months ago. It just doesn't make any sense.

Diversification is still a smart thing to do, just not into altcoins.
Stocks are a good option to diversify, and (if your budget is high enough) property works too. I wouldn't keep precious metal for long-term gains.

Halab's [Contest][ALT] Best portfolio 2022 shows what's left now of $1000 invested in different coins at the start of this year:
That's only because many people believe this: once it goes up, they buy it. Not because they think it's any good, but because they expect to make a quick profit. That makes it a self-fulfilling prophecy.

Once upon a time, a man built a house(five rooms) in a swampy area, during the dry season, he lives comfortably with his family but during the season of rain, the whole building would be flooded.
The man wanted a way to avoid the flood or mitigate the severity. He told his children that they should decongest the sitting room by taking the house documents to room 4, television to room 3, take the beds to room 5, the sofa to room 1 and they will sleep in room 2. By this, if the flood hits the building they may be lucky that the flood may only hit two rooms out of the five and the properties in the other three rooms would be safe.
Well, the idea of the man above is the idea of diversification of some people in the world of cryptocurrencies.

I will like to go along with the idea being bad for a newbie, at least for a start one has to get the best and quality knowledge of the beauty in crypto by starting with the first and most reliable coin (bitcoin) before dabbling into investing on other coins which could turn shitcoin within a little space of time and this may give a bad impression to such newbie even when later advise to invest in bitcoin, that's why i see the need for every beginners to have a start with bitcoin and not until they are good and bold enough with crypto experience they may choose to diversify but not 100% meaning they may invest in other coins they have confidence in their reputation along side with bitcoin but it will bebtoo risky to dump bitcoin for other altcoins.

I totally agree with the post. Crypto currency market is different from the stock market and there is no need for too much diversification here. It is important to invest in currencies that hold a future value in order to be safe. Bitcoin, Ethereum and doge coins are good for investment and have a strong presence in the crypto market. It is better to stick to these ones rather than diversifying your investment with shit coins that hold little to no value. 

Didn't defi, nfts fall down in recent meltdown? What happened to 'Stable coin' UST?


Yes but you can use these assets as roof over your head, or exchange for tangible things in case hell breaks down.

I beg to disagree and that's one of the most common mistakes, hodling altcoin for the longer period of time (especially during bear market) hoping that one day they will be in the profit. In reality, majority of them end up being bagholders of worthless shitcoins.

The right course of action in the vast majority of cases is to sell altcoins with the loss but many don't have the guts to do it and they end up in a much bigger loss eventually.

This. When bitcoin goes up, altcoins goes up. When bitcoin goes down, altcoins go down even more. Diversification as a hedge against risk means buying different assets which are not intrinsically linked to each other and don't follow the same trends. There is no point trying to reduce your risk by putting money in a bunch of scammy altcoins which will only dump even harder than bitcoin does.

Here's a fun experiment: Go to the historical snapshots page on CoinMarketCap (https://coinmarketcap.com/historical/), and go back a year, two years, three years, and take a look at some of the top 10 coins. Then see where they are now. Some examples which were shilled heavily when they were at their peak, and their rankings as of today:
BCash - 23
Stellar - 26
EOS - 48
BSV - 57
IOTA - 58
NEO - 68
Dash - 76
NEM - 88
LUNA - 209

What's been constant the entire time?

Bitcoin - 1

Spin forward another 3 years and I'm certain the likes of Solana and other top ten nonsense will be several dozen places down the ranks. And Bitcoin will still be number 1.

Crypto market has different field too such as Blockahin, DeFi, NFTm Stablecoins, etc.  "fiat, metals, real estate, etc" can be classified as an asset and moving with same direction base on the global economy. Newbie is just not using diversification properly and just choosing random shit coin with random amount/percentage of there asset. true diversification requires a rule book that will determine the risk factor each coin and how much percentage that only allowed to invest with that risk involved. Crypto traders/newbie are doing a uneducated diversification that's why it always result to disaster.

Altcoins can recover much faster to Bitcoin. This can immediately compensate the lose during the bear season if user just hold until the point that they are on profit. Weak hands + BS Diversification will surely result to current crypto traders right now.

Diversification is necessary but in the same field? It's stupid. Crypto market depends heavily on Bitcoin and other tokens depends on the chain they were created on.

Real diversification includes - fiat, metals, real estate, etc. But most people don't have that much capital so you are better off having savings in fiat and crypto. So you can live off it while crypto is melting.

It is worth noting that the risks altcoins have is not just because they are alt-coins but because they lack real utility. Unfortunately all altcoins (except a handful like Monero) don't offer any real utilities that could be used in real world or they offer fake utilities like ethereum and that makes them lack real value hence their price always dumps in the long run.

up!

Short reminder why diversification away from Bitcoin migh increase your risk:


Best proof: Altcoins "Terra Luna", where "Terra USD" is based on, did completely collapse recently.
Even 2 weeks ago "Terra Luna" was at 82 USD at place 8 according to Coinmarketcap:



But now, after a few days of heavy losses, "Terra Luna" is only trading below 0.3 Cent. 






Yes, Altcoins can offer huge upside potential but Altcoins are also very risky:


Buying Bitcoin means buying a trusted and proven asset. 
Buying Altcoins means gambling to some degree.

Totally agree with you. Diversification within the framework of the cryptocurrency market alone makes little sense, by and large, all movements in the cryptocurrency market occur synchronously.
I would consider diversification in the cryptocurrency market only in two-part format, one is Bitcoin, the second is altcoin, for example, Ethereum, in a ratio of 70 to 30, this will be enough. T
rue diversification begins only when you place your assets in various unrelated areas, or related to each other only indirectly.

There are many variables and factors that may affect the degree of correlation between Bitcoin and altcoin and I believe Bitcoin trading pairs is one example, as it is tied up to BTC as the base currency that have a value correlation with the price of any altcoin but it doesn't necessarily defines correlation. Of course, there is also the possibility of deviation. Imho.

there are of course altcoins that have gained value but the problem that i have is that when it comes to "investment" i don't like leaving it to "chance", instead i want to see potential before making an investment. and so far i have never seen any long term potential in any of the altcoins.

for instance take the biggest altcoin market-cap-wise, ethereum. at first back in 2015 i thought it is one of the best projects ever built because of its idea but the more i looked at it the more flaws i saw, centralization, lack of scaling, roll back and lack of immutability, the huge premine, scams, their market manipulations,.... so i never saw any potential in it.
looking at its price, it has not gained its value through adoption or consistent rises over time. instead it gained its value through pumps and only one of these pumps has lasted, the rest have popped and price has gone back down.
the initial pump was in 2016 when after a year of constant dumps they pumped it from 0.002 to 0.03 in only one month and again after another year of dumping down to 0.01 they pumped it to 0.15 this time in 5 months and it has been dumping for over 2.5 years back towards that 0.01 (currently 0.02).
that is why they are best for short term trading (1 month, 5 month here or the usually 500% pump in one day) not long term investment.

I took one step forward in this diversification idea, and I took a look at this site:
https://www.bitwiseinvestments.com/

They have some passive funds, which are similar to an ETF.

They have those Cryptocurrency Index funds, which are Top10, Top100, etc... by market capitalization. They do not do fundamentals research or whatever. They just pick the top cryptocurrency by market capitalization, this is why they are a passive fund.

I compared the performance of all those funds agaisnt bitcoin since january 2017 and since one year ago. Especially the Top10 one, which you can see its composition on the right side (only "good"coins, eth, xrp, dash, ada, bch, xml....)
The result? Bitcoin has a better performance.

You can check here:



Since November 2018, Top 10 cryptocurrencies performance was 10%, while bitcoin 37%.
If you look at top 70 (more shitcoins), their performance was -50%, while bitcoin +37%.
Top100 was 6%, while bitcoin 37%.

Considering since 2017 1st January (since fund launched), top10 perfomance was slightly better: 844% vs 807% bitcoin. So top10 performed slighty better (5% more money), however with much more  risk.

Conclusion: Sell your shitcoins and buy bitcoin. It is better in long term and less risky. (considering past performance)

The advice "Don't put all your eggs in one basket" is something that does not apply in the crypto market, yeah sure that there are some crytpocurrencies that goes into the opposite direction compare to the majority but almost everything follows the movement of Bitcoin or if not Bitcoin the majority of the altcoins during alt season. Don't put all your eggs in one basket simply means do not put all your money in the same industry where in stocks you must focus your money into different sectors like one for energy, one for real estate, and another one for banking in the crypto "industry" you don't have that kind of diversification option since they are all cryptocurrencies and they only belong to one industry.

True for newbies. Most other coins correlate strongly with Bitcoin, and crypto as a whole should be only one asset in the portfolio of a newbie (or anyone, really).

Also, people should at least roughly know what they're getting themselves into when *investing* in something, and Bitcoin will be the asset with the most reliable information.

Do you mean trading pairs like ETH/BTC? I don't think that defines correlation. It's about the fact that cryptocurrencies in general belong in the same very narrow industry. Like all oil stocks go up and down in lockstep because some crown prince said something regardless if those stocks are traded against USD or EUR, cryptocurrencies also move mostly the same direction when something happens that affects the crypto industry.

By market cap (~$200 billion) this industry is similar in size to S&P airlines sector for example, and about 5% the size of banking, to give you a sense of scale, even tho stock market caps don't compare directly to crypto often fake market caps. This shows both that there is lot of space for growth and that being so tiny it can be affected by any little thing and there is not much room for diversification inside it.