Decision Making in Crypto: Security vs. Diversification, where do you position yourself?
Hello Project HOPE friends, I hope you all have a great weekend. I would like to share a simple but clear vision of what I consider may be a kind of "classification" of cryptocurrency investors, and how they can go to one side or the other of the market depending on the way they manage their risk.
In general, when we are crypto investors, we constantly find ourselves at the crossroads of choosing between security and diversification of our investments. On the one hand, we can choose to invest in the coins that appear on the list of the best projects by market capitalization, such as Bitcoin and Ethereum, or cardano, which gives us some stability and security in investments.
On the other hand, we can also choose to invest in other altcoins, with less capitalization, which increases our risk, but also our chances of making significant profits.
Investing in top coins by market capitalization, such as Bitcoin and Ethereum, can be considered a safer option compared to investing in altcoins with less capitalization. These coins have proven to be more stable and have a larger and more established user base.
Additionally, their liquidity is generally higher, making it easier to buy and sell these currencies in the market. Above all, the latter, considering those large investors with large capitals. However, although the security is higher, the potential profits may be limited compared to altcoins.
Because a currency like Bitcoin or Ethereum could hardly give us X10, for example, or X5, something that is quite common to see in other alternative currencies.
On the other hand, investing in altcoins with less capitalization can be riskier but also more rewarding in terms of potential profits, which is why I mentioned above.
These coins are usually in the early stages of their development and have the potential to grow significantly in value in a short period of time. However, due to their smaller capitalization and lower liquidity, these currencies are also more susceptible to market volatility and sudden changes in value. And not to mention the well-known memecoins, which will generally have a boost, and will tend to disappear.
Obviously, in terms of risks and potential gains, investing in the top coins by market capitalization generally involves lower risk but also more limited profit potential. On the other hand, investing in altcoins with less capitalization involves higher risk but also higher profit potential.
It is the same thing that happens in traditional markets, greater risk, greater possibilities of large profits, and quite the opposite. It is up to each of us to choose where we want to position ourselves, or even have a diversified portfolio.
Your post has been rewarded by the Seven Team.
Support partner witnesses
We are the hope!