This is a long overdue follow up to a post I wrote in March

https://steemit.com/cryptocurrency/@bitbrain/how-to-diversify-your-crypto-portfolio-part-1-intro
That post dealt with considerations when splitting up your investments: number of coins to hold, amount of each to buy, risk and ROI.

Regular Bit Brain readers will know that my own portfolio is very diverse (Probably too diverse for the USD value I hold). I showed that here:

• https://steemit.com/cryptocurrency/@bitbrain/coins-i-hold-part-1-longest-term-hodl-coins
• https://steemit.com/cryptocurrency/@bitbrain/coins-i-hold-part-2-strong-hold-coins
• https://steemit.com/cryptocurrency/@bitbrain/coins-i-hold-part-3-everything-else

I therefore have a decent amount of experience in dealing with a diverse portfolio (it's been hovering around the 70 coin mark for the last few months). What I want to do today is to share my experience, specifically my failures, in the hope that you can learn important lessons from my misfortune.

It is thanks to diversification that my misfortune didn't wreck me. As you will see, I've had my fair share of it. Granted, you could also blame diversification for it, but I hope that you will see my point at the end of the day.

From https://pixabay.com/en/directory-diversity-signposts-281478/

DIVERSIFY YOUR PORTFOLIO - Part 2 - Why diversify?

I have decided to write this post by means of examples. This will show you what can happen to someone, indeed what has happened to someone. All of these are true stories and have happened to me personally within the last 12 months.

A comedy of errors:

Unobtanium

Unobtainium (UNO) is a rare coin. It has a max supply of only about 250 000 coins. I bought UNO fairly cheaply for an average of around $50. It started climbing steadily in value, very steadily and I was very pleased with it. In about three months it climbed to around $130. And then it got delisted from a major exchange. The price crashed, but I knew that it was an overreaction and UNO would climb steadily again. Then suddenly one night UNO went beserk. It shot up in price, from a crashed price of below $50 it flew up to over $400 within mere hours. Seeing this climb I immediately sent mine from my wallet to the exchange to sell it. Only to find that it required 200 confirmations! (If I remember correctly). It took over 13 hours for my coins to get there. In the mean time I sat and watched in horror as the price dropped again. Lower and lower. Eventually I sold (at I think about $150, still a decent profit, but so much less than I should have got!) and UNO crashed it's way down to $80 and then started losing value more slowly. It's not a terrible story because I still made a profit, but I should have made far more. I was screwed over by a ridiculous confirmations requirement. I never bought UNO again, despite wanting to, because I never want to have to wait that long for a simple trade again. What's the point of holding a coin if you can't sell it when you need to?

SAFEX

SAFEX is a great coin, but the exchanges that used to list it are not. In a very dodgy move, one of only two available SAFEX exchanges at the time announced a delisting of SAFEX and closed down trading. The other exchange then suddenly developed problems with its SAFEX wallets and put them into maintenance. This left me stranded with my SAFEX on an exchange and no way to move it to sell. While the exchanges played price games to their benefit, I could only watch as my SAFEX dropped in value. When I could finally sell the price was pretty miserable and I decided not to. (SAFEX is a good coin and worth holding.) I moved my SAFEX to a wallet and that is where it sits to this day.

COSS

COSS is both a coin and an exchange. Like KuCoin, it was designed to pay OCSS holders a small amount of all trading fees on the COSS exchange. But there was a problem: COSS was not a very good exchange. The interface was laggy and unhelpful, the charts were poor and the wallets were always in maintenance. COSS started losing popularity. Seeing this I emptied all my wallets on the exchange except for my COSS tokens. As the decline set in I sold off half, and then a few more. This still left me with a decent amount of COSS (I had bought in early and cheap). But COSS continued to degrade, to the point that the exchange became unusable. I decided to sell up and get out. But it wasn't so easy. Finding trading pairs to sell to was a nightmare. The spread was so high that any traded resulted in huge losses. So I sold my COSS at a huge loss, only to get stuck in another coin that had wallet issues. A few more trades and bounces around between coins saw me lose a massive percentage of my original value. Eventually I got an ETH trade to work and sent it to another ETH wallet of mine. If I remember correctly it took about a week for the transaction to clear! I lost most of the value of my COSS from that episode. That's why when people tell me that COSS is working nicely now, I'm not interested. I know what happened there before and I'm not going through that again!

Electroneum

I've been a part of many ICOs, there was a time that I would buy into a couple every week. Electroneum (ETN) was one of these. With a good marketing idea, and promising many things, the ICO launched. So far so good. Until product launch day at the end of the ICO. In those days we used to buy into an ICO, wait for an exchange listing, sell straight away for a huge profit, wait for the crash soon after, buy our coins back at discount and then watch the price climb back up. That was the standard modus operandi, ask any serious ICO investor. But when ETN was due to launch, it failed. HORRIBLY! The website was complete garbage and the phone app was just as bad. It took over two weeks for my transaction (to get my coins to the exchange) to do something, and then it only did because I gave up waiting and somehow managed to resend it. During all this time I was swearing at customer support daily! Understand this: I was literally sitting at my PC, watching the countdown and clicking the button THE VERY SECOND the website went live. The string of failures to even get registered on the website kept me busy for 10 hours straight! Needless to say I was furious! But that was only the beginning. This is not an ETN post, so I will not elaborate further, but ETN carried on messing up, and on and on and
on. For months! It was ridiculous! I sold my ETN as soon as I eventually could and never looked back. It is by far the worst ICO I have been a part of. I would seriously rather put money into BitConnect than into ETN!

Centra

A credit card based payment coin I had invested in. The Centra founders turned out to be a little on the fraudulent side and were caught and charged. This dropped the price steeply. I was lucky enough to get the news fairly quickly and to get out with a loss of only around 30-40%.

Envion

Such a great coin, such a great idea, such a great team. What a pity that the CEO is a lying, cheating d-bag! Long story short: he is being sued by the founding team. The project has also suffered terrible delays thanks to his "leadership". The price of Envion crashed badly when the news of the lawsuit broke. I'm a little crazy so I held mine and bought more. For the record I have a lot of faith in the founding team, but the project will certainly take longer than expected. It's still a great coin, but is has lost me a fortune! I went pretty heavily into Envion, first in the ICO and then in several buys since then.

Bitcoin Gold

I've been waiting for BTG to do something for a long time. I've been holding varying amounts of it since it first appeared. It should have taken up mining power from Ethereum when ETH went to Proof of Stake, but ETH still has not done so. So instead of mimicking the performance of the likes of Bitcoin Cash, BTG has dropped and dropped and dropped. But I'm a patient hodler and I don't mind a drop, it's part of the long term game. So I bought more and I held - waiting for something to happen. Well something did happen, just a few days ago: BTG suffered a 51% attack. Yes, it was directed against exchanges, but that doesn't matter, the coin's reputation got hurt. The fact that it can be 51% attacked means that there simply aren't enough miners interested in mining it to make it properly secure. After being attacked, it becomes even less attractive to miners, thereby further decreasing it's security. I hear that the BTG team are working on a solution, but seeing as that would probably result in some form of centralised control, I can't really consider that to be a good thing either. Sadly I have made the decision to sell my BTG (at an enormous loss), possibly a bad move, but I'd rather put those funds into something with more positive growth potential.

Titanium

Titanium (BAR) was compromised. To reset the playing field the BAR token was made null and void (though it continued to trade for some time, even achieving some very positive price gains!) and the new TBAR token was issued in its place. About a day ago the Titanium CEO followed in the footsteps of the Centra guys, but was caught out in his lies about partnerships with the likes of Disney and Verizon. TBAR is still busy crashing as we speak. Unfortunately it never made it much over ICO price, so I never sold any of mine. Unlike with Centra, I did not hear the news quickly enough (I should have reacted to the price movement, but price movements have been so negative lately that I did not realise that this was abnormal until it was too late). My TBAR is now worth so little that it is literally not worth selling.

Diversification:

My diverse portfolio means that I have several coins in it that will fail, I know that. Sometimes it is my fault: I did no research into Titanium, I bought it on a whim; I took a chance on Bitcoin Gold and Electroneum; I should have dug deeper into Centra etc. Sometimes you just get unlucky - I researched Envion until my fingers bled, but it didn't help me, did it?

But just imagine that I had only held these coins. What if I had put everything into Centra, or Titanium? What if I had a portfolio consisting only of BTG, COSS and SAFEX? I would be ruined. Yet here I sit, right as rain. I'm not happy about my failed coins, but they haven't hurt me badly BECAUSE I HAVE ABOUT 70 OTHERS THAT ARE STILL DOING OKAY!

And THAT is my take home message today. Diversification has kept my portfolio safe from disasters. No matter how bad one coin gets, it can't ruin me (not alone anyway). Even if my biggest holding goes to zero tomorrow, I will still have a lot more remaining than what I lost. It is this very important characteristic of broad diversification that makes it so important in the crypto market.

Conclusion

This is not the stock exchange! Crypto is still the "Wild West" of trading opportunities, big rewards can be made, but the risk is huge! There are so many ways that a coin can fail, so many things that can go wrong. So spread that risk out! I'd rather catch a few bad coins and lose 2% of my portfolio than risk losing half of it because I only hold two coins.

The examples I mentioned today were only anomalies, I did not even touch on poorly performing coins! The same logic can apply to that scenario too. Of course the other benefit of a diverse portfolio is that you stand a far greater chance of catching coins as they "Moon". That's another story, but think about it. Do you want to wait for one of your five coins to Moon, or would you rather take smaller profits from one of 50 as they come along more often?

Yours in crypto,
Bit Brain

DISCLAIMER:
I am neither a financial advisor nor a professional trader/investor. This is not financial advice, investment advice or trading advice. Unless otherwise stated, all my posts are my opinion and nothing more. Crypto is highly volatile and you can easily lose everything in crypto. You invest at your own risk! Information I post may be erroneous or construed as being misleading. I will not be held responsible for anything which is incorrect, missing, out-of-date or fabricated. Any information you use is done so at your own risk. Always Do Your Own Research (DYOR) and realise that you and you alone are responsible for your crypto portfolio and whatever happens to it.