Why spreading your investments can help you manage crypto’s wild swings

Anyone who’s spent even a little time in crypto knows that prices move fast. Up one day, down the next. Volatility can be exciting, but it can also make investing stressful. One of the simplest ways to steady that ride is through diversification. In traditional investing, diversification means spreading your money across different asset types such as stocks, bonds, real estate, etc. The intention behind this methodology is so that no single asset type defines your financial performance. The same thinking applies to crypto. Instead of betting on one coin, you can own a mix of assets that serve different purposes, use cases, and risk levels. The intention is the same, no single coin can define your financial performance.

Why it matters

Crypto markets often move together, but not always in the same way. In the early days of the crypto markets, all assets followed Bitcoin’s movements and price charts were often identical across all of the top crypto assets. We are now seeing a clear shift in that behavior. Bitcoin may set the tone, but altcoins sometimes chart their own paths. There are many reasons for this change – maturing markets, differentiated use cases and institutional involvement to name a few. Why is this important? Because one coin may increase in value while another falls in value. By holding a mix, you may help smooth the extremes. It’s not about avoiding risk—it’s about balancing it.

Building a diversified crypto portfolio

• Start with your core.

  Many view widely traded assets such as Bitcoin and Ethereum as the foundation of a diversified crypto portfolio—they’re established, liquid, and widely used. They are both widely recognized as the two dominant crypto currencies in the market today.

• Add variety.

  The crypto ecosystem includes a variety of types of crypto assets that enable individuals to explore diversification, such as:

  • Layer 1 networks (like Solana or Avalanche)

  • DeFi tokens that power decentralized apps

  • Utility or governance tokens for projects you believe in

  • Stablecoins for liquidity and calm

• Avoid over-concentration.

  Even strong coins and assets face surprises. Spread exposure to limit the impact of any single event. Setting a maximum threshold for any individual asset or coin in a portfolio and keeping allocations below the limit for any one asset is one way investors might monitor this risk.

• Revisit and rebalance.

  Crypto moves fast. A portfolio that began with a careful balanced and allocated portfolio (see #3 above) will start to drift. Regular check-ins help keep your mix aligned with your goals. Evaluate the drift of your portfolio as well as the individual performance of those assets and determine if a rebalance is necessary. [Refer to Article on Advantages of a Robo Advisor here]

• Evaluate transaction costs.

Before rebalancing your portfolio, evaluate the transaction costs associated with each rebalance. If the drift (see #4 above) is minimal, a rebalance and the transaction fees incurred might not be appropriate. However, if a single and more volatile asset in your portfolio has recently overperformed and is now above your allocation threshold (see #3 above) for any individual asset, consider reducing your exposure to that asset to keep it within the guide rails you set.

The takeaway

Diversification will not change crypto’s volatility—but it can make the journey more manageable and provide benefits to your portfolio. Instead of chasing what’s next, focus on building a mix that reflects your goals and comfort with risk. Over time, that steadiness keeps you in the market long enough to learn, grow, and evolve with it.

Disclaimer: This material is provided for informational and educational purposes only and should not be construed as personalized investment, financial, tax, or legal advice. References to specific assets or strategies are for illustrative purposes and do not constitute a recommendation or an offer to buy or sell any security or digital asset. All investing involves risk, including the possible loss of principal.