A lot of altcoin owners are putting their money at terrible risk by not diversifying their cryptocurrency holdings.
Diversification simply means not putting all your money in one place, so you do not lose it all if something goes wrong. Cryptocurrency owners need to learn how to diversify because of the volatility of some altcoins in today’s market.
The price fluctuations of some altcoins are absolutely incredible and dangerous. Between November 24 and December 1, 2017, the Coin Price of Bitcoin increased by $2,376.05 or 28.85%. That means Bitcoin holders saw their investment increase by nearly 29%.
The danger here is that cryptocurrencies can lose value just as fast. The BBC reported that Bitcoin rose to a high Coin Price of $11,434 on November 29, before dropping to $9,600 on November 30. That means Bitcoin owners lost around 16% of their investment in just one day. Coinbase reported that Bitcoin was trading at $10,612 on December 1, 2017.
How to Protect your Money with Diversification
Fortunately, diversification can help you protect your money and sleep at night. A good basic diversification strategy is to simply own two or more altcoins.
A basic means of protecting your money is to own both Bitcoin and Ethereum. Ethereum’s price fluctuations on the week of November 27 were wild but not as wild as those of Bitcoin.
Ethereum’s Coin Price fell by 3.46% during the week between November 24 and December 1, 2017. That means holders of Ether coins faced less risk than Bitcoin owners. They lost money, but their potential losses would not be as great as Bitcoin owners.
Why you need to Own More than one Kind of Cryptocurrency
An even better way to protect your funds; is to invest some of your money in a less-popular but more stable altcoin. A good candidate is DASH which had a Coin Price of $788.29 on December 1, 2017.
DASH offers less risk than Bitcoin because it is not as well known, and therefore not subject to some of the wild trading and vast price fluctuations. The change in the DASH price rate was just 7.24%, meaning that the amount of risk with DASH was about one-fourth of that from Bitcoin.
More importantly, it is possible to make a lot of money with DASH. The DASH Coin Price on January 1, 2017, was $11.22 according to Coin Market Cap. That means people who held DASH all year made $777.07 on each coin they held.
Therefore, everybody should investigate lesser altcoins such as DASH, ZCash, NEO, etc. and add a couple to their portfolios. Persons that ignored DASH and only held Bitcoin missed out on a great money making opportunity over the last year.
How to Create a Cryptocurrency Portfolio
A great altcoin diversification strategy is to create a portfolio. The portfolio should consist of a few cryptocurrencies that you really like such as DASH, Bitcoin, and Litecoin.
To add a further margin of safety you should keep at least some of your altcoins in a hardware wallet such as the TREZOR or the Ledger Blue. A hardware wallet is a small electronic device similar to a flash drive that lets you store cryptocurrency offline.
You should also research cryptocurrencies carefully and find a good exchange at which to buy a number of different altcoins. That way you will be assured that at least part of your investment is safe. Diversification can be the key to making money and reducing risk in the cryptocurrency markets.