Crypto investing has gained so much popularity all across the world in recent years that we’ve long passed the stage when people asked themselves whether they should invest in digital assets or not. The question of the hour now is which coins should one choose to gain crypto exposure.
As expected, most investors’ attention is inevitably drawn to Bitcoin – the biggest and most notable coin in the asset class it initiated. The fact that Bitcoin is light-years ahead of its altcoin peers in terms of value and is one of the few assets that have been able to stand their ground and push forward in less-than-optimal circumstances are the main reasons why investors favor Bitcoin over other virtual currencies and choose to adopt a Bitcoin-centric approach when it comes to crypto investments.
Nevertheless, one can’t turn a blind eye to the multitude of cryptocurrencies that have come to populate the market since Bitcoin’s emergence. Although most altcoins are nowhere near as popular with investors as the crypto king, they deserve consideration, and many believe they also deserve a place in investment portfolios. So, why not buy Render, Tether, or other cryptos that show potential for high growth instead of walking down the same beaten path of Bitcoin investing?
There are solid arguments in favor of both these options, which can make it difficult for investors to make a decision regarding the allocation of their crypto-destined funds.
The case for a Bitcoin-only approach
First, let’s examine why so many investors focus entirely on Bitcoin when they could just as well put their money into a variety of other digital currencies.
There’s no denying that Bitcoin has a lot of things going for it. First of all, it’s the longest-running crypto and most famous crypto in existence – so famous that its name has become synonymous with the crypto industry; it has introduced the world to a new and innovative form of money that offers an ingenious decentralized alternative to traditional finance; it has been through all of the bear and bull cycles the market has experienced so far and managed to emerge successful and increase in value due to its strong fundamentals and core characteristics.
Bitcoin is also the first and only crypto to be made a legal tender and is among the few cryptocurrencies that are accepted as a form of payment by a growing number of businesses and organizations worldwide. Being the most established, legitimate, and reliable asset in a market that is known for its extreme volatility weighs a lot in investors’ decisions. Bitcoin’s resilience, appreciation potential, and long track record in the market make people see it as the safest option for investment in its class and trust it more than any other cryptocurrency.
If there’s one crypto that can survive all kinds of challenges and reach mainstream adoption in the future, that would be Bitcoin, so whoever invests in it now may reap numerous rewards later on. No other digital currency boasts the same combination of compelling characteristics, and that’s reason enough for investors to stick to Bitcoin.
In many ways, Bitcoin offers the path of least resistance. It’s simply easier and more convenient to invest in a coin that has already proved its worth and potential than to scour the market for a dependable crypto asset that could serve as a good investment and carry out in-depth research to ensure you’re not putting your money into an unproductive or worse, a fraudulent project.
All these aspects explain why a large number of market participants prefer a Bitcoin-only strategy.
The case for diversification
The famous saying “don’t put all your eggs in one basket” sums up the main argument for diversifying your crypto investments. For all its strong suits, Bitcoin is not foolproof. We’ve seen it plummet numerous times, and although it managed to bounce back at every turn, there’s no guarantee it won’t suffer an irremediable crash at one point. If Bitcoin fails and you have all the money destined for crypto investing tied up in it, your funds, along with the time and effort you’ve put into building your digital holding, would go down the drain.
Diversification remains the simplest and most effective risk management solution for crypto and all other tradable assets. If one asset flops, the rest can make up for the loss, so you never run the risk of losing your entire capital. Keeping risks in check should be a top priority when dealing with crypto since the market is highly unpredictable. When you add other tokens to your portfolio alongside Bitcoin, you lower risk considerably and maximize long-term profitability.
Besides, Bitcoin is not the only crypto that has the potential to generate gains. There are plenty of other promising coins in the market, so why limit yourself to just one? Many of the projects that are now in their early stages may blow up in the years to come, and jumping on board when they’re still maturing and accessible can set you up for considerable returns.
You don’t want to pass over successful cryptos and miss out on the opportunity to boost your profits just because you couldn’t be bothered to look beyond the crypto leader. Therefore, exploring the market and diversifying your crypto holdings allows you to gain exposure to other auspicious coins.
Final thoughts
Bitcoin-only investments and diversified crypto holdings are completely opposite approaches that can yield very different results. Whichever path you may choose, make sure you are well informed on the risks that crypto investing implies, and do your due diligence before you get started. Whether you’re going for crypto diversification or not, you should still consider limiting your crypto investments to no more than 10% of your total portfolio.
