Explain Crypto Asset Diversification.
Explain Crypto Asset Diversification. Crypto asset
asset diversification is something we should all be doing regardless of the goals we may have for our investments. Simply put, asset diversification is the idea of having a
significant amount of buying power of.com domains that are
spread throughout a region. A great Matt McGee wrote an excellent article recently on this idea, and you can certainly google
it.
Why would we want this type of diversification?
Since people can read.com domains in the US easily, they are seen as a higher risk investment for
the reasons previously discussed.
By spreading our crypto holdings throughout many geographic locations, we absorb the risk that comes from so many economic changes over a
period of time as we all move (or are forced to move). While we probably don’t wish to move tomorrow, we don’t want 30% of our portfolio to be totally wiped out by
a 10% drop in the stock market in a year’s time. We also don’t want the economy to change so drastically in a rapid fashion, and so investors with large
long term growth hopes should be diversifying.
Another reason that we want to stock up on crypto assets is that in the future, they are projected to have
more exchange traded volume and therefore increase our tax efficiency. As government becomes more involved in our everyday lives, this
will only become more critical.
Benefits to us as investors
By purchasing different types of crypto asset, we are able to spread out our risk a bit further by having multiple
targets and benefit from a variety of benefits as we see fit.
allows real estate investors to diversify their crypto holdings through a number of different vehicles and investment strategies.
What is crypto asset diversification? It’s when an investor gains enough bitcoin or ethereum (the token of cryptocurrency) that they can potentially create a significant amount of wealth.
Pros: This sets you apart from your competitors. You're the only person in the entire world who can effectively diversify your crypto holdings. There are only so many ways to play this game. With several million dollars of capital going into crypto asset investments, it’s one of the most attractive high-stakes game plans on the planet.
Cons: Unlike Other Investments, You Can’t Play the Same Game With Every Investment. Unlike real estate or commodities, you're competing with an incredibly skilled opponent—the cryptocurrency network. When the dust settles, who will come out victorious?
How to Choose Your Cryptocurrency Diversification Strategy
The most important factor in successfully navigating crypto asset diversification is how you’ll manage your portfolio.
Invest with as many different cryptocurrencies as you can comfortably afford. For those with small investments, it’s a good idea to have some crypto that can scale without costing you a lot of extra money. Cryptocurrencies like Dash and LiteCoin (as well as more esoteric ones like Ethereum and Monero) are free, they’re accessible to nearly anyone, and they work well as a medium of exchange. That means no more cutting into the profits to pay for a $50 coffee, just buy the cryptocurrency otherwise, then use it as a medium of exchange.
Try as much as possible to find a balance with your crypto investments. Smart investors may avoid paying too much for the biggest and best cryptocurrencies, instead choosing ones that exist at the bleeding edge. That’s the beauty of things such as technology stocks or startups. They’re new, experimental, and offer an incredibly diversified upside. Regardless of whether you choose to go the self-directed IRA route or cryptocurrency route with your investments, you can reach financial independence through your investments.