Diversification Strategies for Crypto Portfolios

In a bull market, everything goes up. In a bear market, correlation approaches 1 (everything dumps). However, diversification is still your best defense against project-specific risks (hacks, lawsuits, etc.).

The Barbell Strategy

• 80% Safe Assets: BTC and ETH. The "Blue Chips."
• 20% High Risk: Low cap alts, AI coins, Memes.
• Goal: Capture the safety of majors while exposing a small amount to 100x potential.

Diversification by Sector

Don't just buy 5 different "Layer 1" blockchains. Spread your bets:

1. Store of Value: Bitcoin
2. Smart Contracts: Ethereum/Solana
3. DeFi: Uniswap/Aave
4. AI: (Emerging Sector)
5. Infrastructure: Chainlink

Diversification by Strategy

This is unique to algorithmic trading. Don't run 5 bots all using Momentum.

• Run 1 Grid Bot (Profits from Chop).
• Run 1 DCA Bot (Profits from Dips).
• Run 1 Momentum Bot (Profits from Rips).
• Result: Smooths out your equity curve.

True diversification isn't just owning more coins; it's owning unconnected risks.