Let's Talk About Diversification In Your Crypto Investment.

There are a lot of things that we do ignorantly or let say that we even are aware of it but we actually just take it with levity of hand. There are actually somethings that I have done in the past that either I was not aware of and even when I was aware of it but I actually ignore it due to one reason or the other. At the end of the day it leads me to total regrets and consequences that I need to deal with on my own self actually.

One of the regrets I actually made in my crypto journey years ago was the fact that I didn't learn the importance of diversification. As you always know that I always write from my own personal experience, today I have come to share with you some of the regrets I actually have in the past which affected me a lot. The act of Diversification.

When I actually look back and I saw that I have the opportunity to have become a millionaire due to some token and Shitcoins I bought or invested in but the fact that I didn't learn diversification, I lose out greatly on it and till now still leave me with the scar to actually deal with. Today I have actually come to talk about some of my regrets and share with you guys the importance of Diversification and why you need to practice it in your crypto investment if you have not been doing so. So without wasting time, let's dive into the post for today actually.

Let's Talk About The Volatility Of The Crypto World.

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If there is anything that actually made the crypto world to be distinguished than other financial market system out there, I will say it is due to the volatility. Yes it's Volatility. In fact if you should look at the likes of the stock market, the Forex market and the metals market that talks about gold and silver, the volatility rate of the crypto world is really much more higher other and even though it plays both the negative and positive side for the investors as the Volatility can help to achieve profit or makes you as a trader or an investor run into a loss also.

But let me discuss briefly, what causes the Volatility. Let me start by saying factors like market speculation and news plays a major role in affecting the volatility of the crypto world. If you have studied the crypto world very well, you will agree with me that the prices are actually most of the time affected by speculations. News whether positive or negative plays a huge role in actually affecting the speculation and this birth something called FUD and FOMO.

Well not only that factor. Let me talk also about the market structure of the crypto space. If you should study the crypto market deeply, you will understand with me that the ease in which you can buy or sell a particular assets and without it not affecting the market price except if you are a whale or buying in huge sum. Even though the crypto market is growing so fast, it still lacks the liquidity as compared to other market system like the Forex market structure. This lack of liquidity actually plays a huge role in increasing the volatility so much.

Before I move to the next section of this post, I will also like to talk about the Market Manipulation of the crypto market. Even though there have been increasing efforts to make it looks so transparent and reliant on integrity, I will say the crypto market is still very much vulnerable to what I called the manipulation. One of the causes of those manipulation are those pump and dump schemes that are been run by Shitcoins. This can really create artificial volatility and a really high one that can really be difficult to handle at times if I am not actually mistaken.

Importance Of Diversification For Your Crypto Investment

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Well now that I have actually been able to establish the fact of volatility playing a huge role in affecting your crypto market, let me now talk about the importance of diversification according to the topic of this post.

• Risk Management.

In my last post, I actually talked about the 5 mistakes people make in their crypto journey and I remember mentioning the fact that people cannot manage risk. Yes I know that many of us actually grow up to understand the fact that risk is life and you need to take risk to be successful in this life. That is arguably true but at the same time you need to apply wisdom. With the help of diversification, it actually helps you to spread risk across a lot of assets instead of putting all your egg in one basket. This will help you to manage the risk and reduce the dependency you will have on that single assets. Like I mentioned earlier, crypto market is known for high Volatility. When you practice the act of diversification, it helps you to manage risk and helps you to reduce losses across different assets in your investment portfolio.

• Potential for Higher Returns:

One of the importance of Diversification is the fact that it actually helps you to earn a higher return. It helps by opening up opportunities that can really help to earn high return because by your investing in a whole lot of different assets, it increases the possibility of entering potentials from projects. This will allow you to participate in overall of the crypto market and make the market system strong. This will also help you to reduce your losses at the end of the day also.

• Protection Against Single Asset Risk.

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There is something called the single asset risk which actually a lot of investors are guilty of. In fact I will say I was also guilty of that at one point in my trading journey actually. It is highly risky and not wise for you to actually put all your egg in one basket as things might plays out which will not work actually well and that is dangerous. Diversification protects you against those types of risk, it helps to spread your investment and at the end of the day helps to reduce the impact or result of the single assets event and outcomes we are always familiar with.

Conclusion

I will like to stop here by concluding that it is always advisable for you to always practice the act of diversification. I have really learnt my lesson the hard way and I will not advise anyone to fall victim of what happens to me. In fact so much it causes. I missed out on life changing opportunities due the fact that I am not actually able to Diversify and spread my investments. I hope you are really able to pick one or two lessons from my post today and apply them.

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