Greetings friends, it's actually my pleasure enrolling into this week's lectures on asset diversification and arbitrage trading. I wish to appreciate professor @fredquantum for such an exposure and privilege in navigation into a research as this, below are my takes on your questions.

1. Explain Crypto Assets Diversification.

First asset diversification is a medium or system of delegating or plunging ones asset into different revenue generating areas although which may or may not generate returns at the moment based on ones risk management measures.

Now crypto asset diversification is a diplomatic and rational process deployed by crypto traders or users in the management of their assets by staking their crypto assets into different crypto bases for optimal risk management or to avert the possibility of loosing all asset if it has been staked in a base of crypto.

For instance a trader may decide investing or holding $1,000 worth of his crypto asset on STEEM, BTC, LUNA and LINK instead of holding it as either of these alone. This is an affirmation of crypto asset diversification.

2 What are the Benefits/effects of Diversifying one's assets?

The diversification of ones assets isn't without pros and cons as we will be scrutinizing them below.

BENEFITS OF ASSET DIVERSIFICATION

• TO MITIGATE AGAINST SEVERE LOSS

Crypto assets are very volatile as it can make one rich, so also it can impoverish an individual which is out of instinct as it's obvious to all. So when these assets are diversified, it will help in reducing great losses should the assets has been staked or left in one crypto investment.
For instance one may leave his asset in BTC while the price was about $60,000 and intending it will rise to about $70,000 for him to sell and he's not keeping watch on his investment now against his forecast, price now fall to $41,000 this has actually caused him a great loss and against this is effect is the need for diversification.

• TO BUILD A STRONGER CAPITAL BASE

If a trader invests in an assets which has only 3% increase in price, at the end of the day he'll only realize 3% of his investment
Let's assume he invested $60,000 in BTC and it rose by 3% he will only be making %1,800 by calculation: 3÷100($60,000) =$1,800. On the other hand let's assume he diversified his $60,000 worth of asset on about 3 to 4 assets say: BTC, STEEM, ETH & BNB which rose at different percentages higher than the BTC percentage increase, this would have earned him more compare to when all his asset was invested in BTC alone thereby strengthening his capital base.

EFFECTS OF CRYPTO ASSET DIVERSIFICATION

• LOSS OF ASSET

We can all attest to the fact that an undiversified asset that was hit by a great resistance will consequently be affected by a depreciated value or loss of asset.
Further on this ground let's assume that this is a trader that trades only on spot without the know of other market options like futures where you can either buy long or sell short so this trader may loss a great deal of his asset if not diversified.

• MINUTE OR SMALL RETURNS

Although crypto asset diversification can increase returns, it can also generate a very small returns. For instance let's also consider the BTC as in my second explanation above so let's asset with $60,000 worth of asset was invested in BTC and it rose by 6 to 8 percent and this investor was making upto $3,600 to $4,800 and on the contrary he invested on other assets that has a very small value which also rose probably on the same percentage, there is no possibility of measuring up to when it was invested on the BTC alone which has a greater capacity based on its value and with response to a positive trend at investing in it.

3 Construct Crypto Assets Diversification according to the 1 - 4 Rule - Choose 4 crypto asset (State the reasons for choosing them),
discuss each of the assets, and perform a detailed fundamental/technical analysis on them, Invest a part of at least 15 USD into each of the assets based on the diversification constructed earlier, proper stop loss and take profit levels must be put into place. A real trade on a centralized exchange is expected here.
(Graphics/Screenshots/Charts are required). Note that: You are expected to show your verified account screenshot, your reservoir and the steps involved while investing (For example, if you are investing a part of 15 USD at a time, then, the reservoir must have been 60 USD clearly shown, you can use Fiat or Stablecoin for construction). Kindly take note.

In this regard, I will be using my verified Binance mobile application account in performing these transactions of asset diversification according to the 1 to 4 rule.

I have $96.98 USDT in my wallet which I will be diversifying in this regard.

FUNDAMENTAL ANALYSIS OF THE CHOSEN ASSET

TRX

Tron (Trx) is a crypto-currency founded by Justin Sun which is based on decentralized blockchain technology but created in 2017 and it was initially released on 25th of July 2018 and by January 2019 it was able to generate a market capitalization of $1.6billion.

As it stands, TRX has a dollar value of $0.095 and market capitalization of $6,826,020,271.14 and it is very scalable that is it has the capacity of expanding and increasing in value despite it's little value at the moment.

XRP

XRP was a coin that was invented by Artho B. Jed Mc Caleb and David Schwartz in 2011 and it was officially called Ripple In 2015.
Currently, it has a dollar value of $1.05, a market dominance of 2.30% with market capitalization of $49,125,133,822.22 and it is also scalable meaning that it has an increasing opportunity.

LUNA

This coin was invented in South Korea by Do Kwon and Daniel Shin in January 2018 and was launched in April 2019 it has also grown it's dominance like every other crypto currency in the market.

This coin has a total supply of 1 billion token of which if it exceeds, the coin will be burned as to maintain equilibrium in the market to this has actually contributed to its price increase which was once pegged to $1 to about 30 to $40

Currently it has a market capitalization of $16,913,860,804.01 and dollar value of $42.05.

KAVA

This crypto asset was created by Kava lab and was co founded by Rhuaridh O Donnell Brain Kerr and Scott Stuart and it was launched in 2019, it has about 111.5 million maximum supply which is contrarily subject to inflation and it is estimated that by October 2022 that the token would have reached a 100% dilution.

Currently, it has a dollar value of $6.2 and a market capitalization of $567,773,557.56 with locked total value of $281,999,690.

This is my stable coin token value before trade

These are the various stop loss and take profit levels at the sell position after entering the market.
This is for KAVA

This is for XRP

This is for TRX

This is for LUNA

These are my chosen and diversified asset below which I invested as follows: TRX=$27.87, XRP=$27, LUNA=$24.13 and KAVA=$17.24

Here is my balance after trade =$97.88

and from the two before and after tarde balances indicated that I just made a little profit of $97.88-96.98 =$0.9 although I entered the market against FOMO but because I needed to pull some profit I have to reduce the take profit margin so as to exit the market.

4 Explain Arbitrage Trading in Cryptocurrency and its benefits.

Arbitrage trading which is a means of trading whereby a trader purchases an asset from a broker or exchange at a low rate and intends selling it at a higher cost on another exchange other than the place he bought it with the aim of realizing profit.
It could also be seen as a strategy in which a trader capitalizes on an intermittent price variance that exist In an asset as to make profit within the said period in view.

For instance, as of 8am in Nigerian time using time zone Lagos the ADA is traded at #854.60 on Coinbase while it is traded at #964.51 on Binance exchange now taking this advantage of buying at lower rate from Coinbase and selling at a higher price in Binance with the difference of #109.91 is what is known as arbitrage trading in crypto currencies although I estimated this in NGN.

BENEFITS OF ARBITRAGE TRADING

SHORT TERM PROFIT
This is the most important reason why people goes into arbitrage trading, since one can easily make some profit within the shortest possible period, it induces him to engage more because the sole aim of business is profit and profit within the nearest possible period is actually a hike in the morality of trade.

• OPPORTUNITY MAXIMIZATION
  Arbitrage trading is actually an opportunity to be maximized, since a trader can actually buy some assets at a lower price from an exchange and sell at a higher rate in another exchange it is actually a good maximization of opportunity deployable.

• COST MINIMIZATION
  Let's assume that a trader has $42,000 and in Binance for instance, he can only purchase 1 BTC while in coinbase he can purchase up to 1.03 BTC I believe that this trader will prefer to buy from coinbase than from binance and by these he has minimized his cost

5 Discuss with illustration how to take advantage of Exchange Arbitrage.

The arbitrage as we know and as I earlier explained is a trading strategy where a trader optimizes short term price decrease in an exchange by purchasing from them and selling at a higher rate in another exchange within the period in view for profit motive.

Now how can one take advantage of this, It's quite obvious that we may not have the knowledge of the names of all exchanges in the world as to easily navigate to check on their current prices of assets as to decide where to buy and where to sell but on the contrary we can capitalize on the potentials available on coinmarketcap as to know the prices at which assets are currently traded.

So we go to coin marketcap because over there, there are exchanges you may not have known that exist but coinmarketcap will proof there existence.

After logging in, you go to exchange and you will see the certified exchanges as they are enumerated so now let's use the KRAKEN and BINANCE to expantiate this with the pair price of BTC/USDC

So we click on Binance, to check the price of BTC/USDC and here the price is $47,825.42

Next we logout and then click on Kraken to also check on the price of BTC/USDC and here the price is $47,816.38

On this regard, no trader would like to buy from Binance after this observation if he should be transferring his money from an external wallet like his bank account or some other means, so he would prefer to buy from kraken and transfer to binance for sells.

Arithmetically this trader will be making some profit even after transfer charges but let's assume that there exist no transfer charges he will be making the sum of $9.04 being the subtraction of the two values from Binance and Kraken exchange prices of BTC/USDC which is $47,825.42 - $47,816.38

6 Creatively discuss Triangular Arbitrage in Cryptocurrency. How to identify Triangular Arbitrage opportunities and the risks involved.

The triangular arbitrage which is a trade strategy that is more of cyclical although having the triangular nomenclature is actually a trade of choice based on momentary price difference that exist in cryptocurrencies which traders capitalizes in order to make profit.

Nevertheless in this kind of trade, three pairs of crypto asset are chosen which is actually as a matter of the traders choice of market strategy and proficiency.

Let's now use the BTC, STEEM and TRX to identify this occurrence in the market and assuming they can be paired while taking their dollar values to be:
BTC: $47,840
STEEM: $0.53
TRX: $0.09

Perhaps I have $20,000 to spend on this using the triangular arbitrage, I will then pair these assets thus:

BTC/STEEM, STEEM/TRX and TRX/BTC.
Now purchasing $20,000 worth of BTC, and with it I was able to pair BTC/STEEM this will give me $20,000*0.53= 10,600 worth of STEEM/ piece of STEEM and let's assume that there was a little price variation in STEEM from 0.5 to 0.6 because the need for arbitrage is just price variance which the trader was able to forecast in an asset ,at this we will now be having 17,667 by calculation 17667÷0.6=$29,445, as this value gives me a $29,445 worth of STEEM and at this point I'm now making $9,445 profit

Next I now paired STEEM/TRX at forecasting that there will be a price increase using the current value in my wallet which is $29,445÷$0.09=327,167piece of TRX, nevertheless, the price of TRX was able to appreciate to $0.10 giving me $32,717 by calculation is 327,167÷ $0.1=$32,717 worth of TRX, at this point I'm making a profit of $3,274

Finally I now reaccumulate the BTC using the current value in my wallet which is $32,717 still at the current price and by implication, I have made a summed profit of $12,717 which is my total revenue less total cost; $32,717-$20,000=$12,717.

This is actually what the triangular arbitrage trading looks like besides the need for this is based on the traders forecasting ability on price increase in his target pairable asset.

CONCLUSION

It is quite rational and sagacious on the side of every trader to always implement the asset diversification strategy while trading cryptocurrencies because of the inconsistency in prices so as not to loose out entirely, perhaps the trade should go against your forecast as it's not wise to invest a hundred percent of ones values in an asset.

The arbitrage trading on the contrary is also a diplomatic deployable strategy if actually a trader has enough capital to engage in this because there will also be some significant charges he must incur on the cause transfers from from one exchange to another which makes it a little bit insignificant when a trader does not have a reasonable capital to trade, thanks.

Cc: @fredquantum

Cc: @sapwood