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:
- Store of Value: Bitcoin
- Smart Contracts: Ethereum/Solana
- DeFi: Uniswap/Aave
- AI: (Emerging Sector)
- 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.
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