There's a misconception when it comes to investing in cryptocurrency that I like to call reverse diversification. If you're like me, you thought it would be a good idea to pick a bunch of promising projects and invest a bit into each one. I didn't put a huge amount of money into ICOs but I'm fairly certain those investments are still down like 90%. Take Golem for example. I bought a few coins (very few) at 72 cents. I saw it crash to 3 just last week.

Yikes.

Diversification is an investing strategy that is supposed to hedge risk going forward. Diversification in the cryptosphere can only open up an investing portfolio to more risk, therefore the only way to accomplish this goal is through "reverse diversification".

What is it?

Essentially it is just Bitcoin maximalism. Want to lower volatility to the minimum amount while still gaining exponential value over time? That's Bitcoin.

What if x coin kills y coin?

There is no scenario where Ethereum succeeds and Bitcoin dies. This is not a competition. This is a symbiotic environment, similar to biological life itself.

When people ask me if Ethereum can "kill" Bitcoin,

I'm sitting there thinking...

Can your heart 'kill' your lungs?

Call me crazy, but I like having all of my organs functioning properly. I don't think there is a secret competition between by gall bladder and pancreas as to which one provides the most value. If I lose a vital organ, they all die. Thankfully, the cryptosphere is a bit more resistant than that.

Yes, the cryptosphere is much more similar to some amorphous tumor growing at an exponential rate. Bitcoin and Ethereum are the heart and lungs of the organism. Those are quite necessary. However, then you have networks that are adding clumps of teeth and hair to the tumor and trying to market it like it's magic. Time is the great equalizer.

Conclusion

As you "diversify" to lower market cap networks the implied risk being accepted is increased by a huge margin. The only way to hedge risk in a crypto portfolio is to trade up to higher market cap networks that have proven themselves a bit more in the space. This is why we often see the "altcoins" suffer more during a bull market and investors decide to cut their losses and trade up to granddaddy Bitcoin.

With great risk comes great reward (maybe).

Posted via Steemleo

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