Why you Should Diversify your Crypto Portfolio

Diversification is a bedrock principle of sound investing, and cryptos are no different.

Many crypto investors only hold a single crypto-asset, like Bitcoin, but this approach is somewhat flawed if your goal is to generate a return. An investment into a single asset provides you with 100% of the gains or losses associated with that asset, but not all crypto-asset gains are equal.

Over a year, there can be differences of 2000% in gains between the top crypto-assets, and that means that investing in a single asset gives you considerably less exposure to the sometimes unpredictably good performance of another asset.

There was once a good case in holding only bitcoin, but over the past four years, the total value of bitcoin versus the total value of all crypto-assets has declined from 85% to around 50% at the time of writing. This means that other crypto-assets, through significant gains in value, have outperformed bitcoin.

One approach to get exposure to potential winners is to equally weigh your investments across a “Bundle” of crypto-assets. This gives you an equal opportunity to get increased returns over multiple assets as opposed to just one and gives you a greater chance of catching multiple winners each month if your diversified portfolio is adjusted each month to track the top assets at that time.

A 2018 study called The Case for Diversification within Crypto Investing outlined the case for diversification. Here are some of the key findings:

·   There is massive variability in the monthly difference in returns between different crypto assets,

·   During periods when bitcoin retraces (such as during 2018), other cryptocurrencies were less severely impacted or even returned positive gains,

·   Most coins suffer difficult months, and even the largest cryptocurrencies register as the worst monthly performers at times,

·   Repeating as a top performer is rare: crypto assets may register as a top performer one month but will less frequently repeat that for a second month. Having a diversified crypto portfolio exposes you to the possibility of being exposed to several top performers in a row.

·   Reversals in performance occur regularly: top performers can quickly become worst performers. Diversification is the only safety net against this phenomenon.

As proof of the need to diversify, consider that while bitcoin is up 430% over 12 months, Altify’s Top 10 Bundle (equally weighted over the top 10 cryptos as measured by market cap) is up 790% over the same period. You were far better off invested in the Top 10 Bundle than a straightforward holding of bitcoin.

The Altify Smart Contract Bundle (invested equally over the five largest smart contract-focused cryptocurrencies) is up 660% over 12 months, against 447% for the Altify Payments Bundle (invested in the five largest payments-focused cryptos).


Sean Sanders, CEO of crypto investment company Altify: “The value of diversification is as a well-established fundamental of investing, and any way you slice and dice the numbers, a diversified crypto portfolio will give you better risk-adjusted returns and often better absolute returns over time. That has been particularly evident over the last year.

“Diversification works in every asset class in the world. It should come as no surprise that it works in crypto as well,” adds Sanders.

How to diversify using Altify “Bundles”

The Top 10 Crypto Bundle is like the JSE Top 40 or S&P 500 for crypto and provides equally weighted exposure to the top 10 cryptocurrencies making up more than 85% of the crypto market. This Bundle includes all the cryptocurrencies mentioned in this article and has significantly outperformed Bitcoin over the last 12-months.

The Payments Crypto Bundle provides equally weighted exposure to the top 5 payment focused cryptocurrencies looking to make payments cheaper, faster and more global. These cryptos include the likes of Bitcoin, Ripple, Bitcoin Cash, Stellar and Litecoin.

The Ecosystem Crypto Bundle provides equally weighted exposure to the top 5 smart contract focused cryptocurrencies like Ethereum, EOS or Tron that enable developers to build applications on top of their blockchains, similar to how Apple builds apps on top of its OS operating system.

Altify’s Bundles have outperformed an investment in Bitcoin alone over a 1, 3 and 5-year time period.

All of Altify’s Bundles are rebalanced monthly, this means that the best performers move into the Bundle, and poor performing assets are dropped to catch as much upside as possible each month. 

 

What else does Altify offer?

In addition to Altify’s crypto Bundles, it offers:

Bitcoin: The largest and most well-known cryptocurrency.

Ethereum, the second-largest crypto asset and leader in the smart contract space.

Pax Gold: A regulated token that is backed 1:1 by physical gold held in fully insured London Brinks vaults.

Why you Should Diversify your Crypto Portfolio

Altify Insider

Published

May 19, 2022

By 

Altify Insider

Diversification is a bedrock principle of sound investing, and cryptos are no different.

Many crypto investors only hold a single crypto-asset, like Bitcoin, but this approach is somewhat flawed if your goal is to generate a return. An investment into a single asset provides you with 100% of the gains or losses associated with that asset, but not all crypto-asset gains are equal.

Over a year, there can be differences of 2000% in gains between the top crypto-assets, and that means that investing in a single asset gives you considerably less exposure to the sometimes unpredictably good performance of another asset.

There was once a good case in holding only bitcoin, but over the past four years, the total value of bitcoin versus the total value of all crypto-assets has declined from 85% to around 50% at the time of writing. This means that other crypto-assets, through significant gains in value, have outperformed bitcoin.

One approach to get exposure to potential winners is to equally weigh your investments across a “Bundle” of crypto-assets. This gives you an equal opportunity to get increased returns over multiple assets as opposed to just one and gives you a greater chance of catching multiple winners each month if your diversified portfolio is adjusted each month to track the top assets at that time.

A 2018 study called The Case for Diversification within Crypto Investing outlined the case for diversification. Here are some of the key findings:

·   There is massive variability in the monthly difference in returns between different crypto assets,

·   During periods when bitcoin retraces (such as during 2018), other cryptocurrencies were less severely impacted or even returned positive gains,

·   Most coins suffer difficult months, and even the largest cryptocurrencies register as the worst monthly performers at times,

·   Repeating as a top performer is rare: crypto assets may register as a top performer one month but will less frequently repeat that for a second month. Having a diversified crypto portfolio exposes you to the possibility of being exposed to several top performers in a row.

·   Reversals in performance occur regularly: top performers can quickly become worst performers. Diversification is the only safety net against this phenomenon.

As proof of the need to diversify, consider that while bitcoin is up 430% over 12 months, Altify’s Top 10 Bundle (equally weighted over the top 10 cryptos as measured by market cap) is up 790% over the same period. You were far better off invested in the Top 10 Bundle than a straightforward holding of bitcoin.

The Altify Smart Contract Bundle (invested equally over the five largest smart contract-focused cryptocurrencies) is up 660% over 12 months, against 447% for the Altify Payments Bundle (invested in the five largest payments-focused cryptos).


Sean Sanders, CEO of crypto investment company Altify: “The value of diversification is as a well-established fundamental of investing, and any way you slice and dice the numbers, a diversified crypto portfolio will give you better risk-adjusted returns and often better absolute returns over time. That has been particularly evident over the last year.

“Diversification works in every asset class in the world. It should come as no surprise that it works in crypto as well,” adds Sanders.

How to diversify using Altify “Bundles”

The Top 10 Crypto Bundle is like the JSE Top 40 or S&P 500 for crypto and provides equally weighted exposure to the top 10 cryptocurrencies making up more than 85% of the crypto market. This Bundle includes all the cryptocurrencies mentioned in this article and has significantly outperformed Bitcoin over the last 12-months.

The Payments Crypto Bundle provides equally weighted exposure to the top 5 payment focused cryptocurrencies looking to make payments cheaper, faster and more global. These cryptos include the likes of Bitcoin, Ripple, Bitcoin Cash, Stellar and Litecoin.

The Ecosystem Crypto Bundle provides equally weighted exposure to the top 5 smart contract focused cryptocurrencies like Ethereum, EOS or Tron that enable developers to build applications on top of their blockchains, similar to how Apple builds apps on top of its OS operating system.

Altify’s Bundles have outperformed an investment in Bitcoin alone over a 1, 3 and 5-year time period.

All of Altify’s Bundles are rebalanced monthly, this means that the best performers move into the Bundle, and poor performing assets are dropped to catch as much upside as possible each month. 

 

What else does Altify offer?

In addition to Altify’s crypto Bundles, it offers:

Bitcoin: The largest and most well-known cryptocurrency.

Ethereum, the second-largest crypto asset and leader in the smart contract space.

Pax Gold: A regulated token that is backed 1:1 by physical gold held in fully insured London Brinks vaults.

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