Why do you currencies your Investment in Crypto diversify should
Home Know Why you have your Investment in crypto-currencies to diversify should
Martin Hubmann –
The entry for investors in crypto-currencies usually results in an Investment in the flag-ship Bitcoin. However, you should keep your focus on Bitcoin? Why should currencies more Crypto is not neglect? We have the answer.
According to Markowitz portfolio theory is a combination of several plants is essential, either to the risk to minimize, or the rate of return to maximize. In the optimal case, the risk of a portfolio without reducing the expected return, can be minimized. The rate of return is determined by the price increase in value of the investment. The risk is determined by the volatility, or standard deviation.
Correlation to traditional asset class
From the financial scientific perspective, the very low or negative correlation between traditional asset classes such as equities, bonds or commodities to crypto-currencies is interesting. There is currently no asset class that has similar characteristics, such as crypto-currencies. A lower correlation coefficient, it allows to construct efficient Portfolios in terms of risk-return profile.
The Risk-Return Profile
In order to achieve an optimized risk-return profile, it is primary necessary a certain number of plants, in this case, crypto-currencies. In order to achieve a good diversification effect. recommended 10 crypto-currencies. It should be noted that the “Coins” are liquid and solid fundamentals. An orientation to scripts for crypto-currencies is also advisable.
Correlation within the crypto-currencies
In the “Bear Market” currencies, the Portfolio of Crypto is even wider than with only 10 Coins can be constructed. The purchase of other crypto-currencies is in this section of the market cycle is recommended, since the intra-crypto-correlations increased together approach. As an example, currently, in a increase of the Bitcoin price to 1 Euro, with a simultaneous increase of the Ethereum price of 0.80 Euro was observed. In this sense, the coefficient of correlation is between BTC/EUR 0.80. In the “Bull Market”, so if the market is rising strongly, we see the case at the end correlations between the crypto currencies, so 10 Coins for a solid diversification effect are sufficient.
Complete loss minimize
The purchase of Bitcoins is the first step to a successful crypto-Investor. The market capitalization of the Bitcoins in the overall market is currently over 50%. This proportion may, however, change. In the last Bull market, this fell to under 30%. It is not assumed per se that the current market leader, will also be in the year 2025. Possibly, Bitcoin is a currency by Crypto with better features and the same use cases, even replaced? So you will potentially not unhappy crypto-Investor, could lose everything, you should minimize the possibility of a complete loss, and a diversified Portfolio of build.
The Trend not to miss
A breakdown of the Investments in different crypto-currencies provides other advantages. Due to the early Status of the current Blockchain-universe, it is to estimate impossible at the moment to what crypto-currencies are in the future to enforce and not. It may be Bitcoin, Ethereum, Cardano, Ripple, or IOTA, which make future processes more efficient and give us immense cost savings. It could, however, find other projects a real Use and an ideal compromise between decentralization, scalability, and security. So you don’t put on the wrong horse, it is useful to many crypto-to allocate projects to his Portfolio. The better you think you can the market assess, the more negligent it would be to focus on a few crypto-currencies.
This guest article was www.Coin-Ratgeber.de written. On Coin-counselor high-quality crypto-articles, which are written by many years of crypto and financial experts.