Bitcoin educator and entrepreneur, Jimmy Song, has posted on the benefits (or lack thereof) of a diverse cryptocurrency portfolio. He suggests a fresh argument as to why adding altcoins to a portfolio with Bitcoin makes little sense.
Why Not To Put All Your Eggs In One Basket
In a stock market scenario, the reason for diversification is to reduce volatility and optimise your risk/reward ratio. In buying 10 stocks instead of one, you hedge against any catastrophic failing in that one stock. Although the stock is also subject to certain transparency requirements, so its story and reality are likely to correlate pretty closely.
In contrast, for most cryptocurrencies, the story and reality could be poles apart. The reality lies in the code, which is incomprehensible to the majority of investors. It may not be even available, leaving just the white paper, or story, to go on. Cryptocurrency does not have the same checks and balances to ensure that these correlate. In fact, there can be an incentive for the development team to…