How to Diversify Your Crypto Investment Portfolio

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Did you know that, according to Allied Market Research, the size of the global cryptocurrency market had a value of $1.4 billion in 2020? Additionally, it has an expected compounded annual growth rate of 12.8% between 2021 and 2030.

Considering expert predictions on future market growth, you may be considering building an investment portfolio. Specifically, you’re likely considering creating an investment portfolio in cryptocurrency to make money from this booming industry.

You might also be wondering about how to diversify your portfolio. But if you don’t know how to get started, this can be stressful. Fortunately, this article will review how you can diversify your cryptocurrency portfolio. Unlike investing in paintings, diamonds, or watches you won’t be able to admire your physical riches in a vault, but that doesn’t make them any less valuable to you.

Read on to learn more about how to reap the benefits of investment diversification, investing in a crypto portfolio.

What Cryptocurrency Investment Portfolio Diversification Is

Before we go into the different ways you can diversify your portfolio as a crypto investor; we’ll explain cryptocurrency investment portfolio diversification. Crypto Investment Portfolio Diversification is when you invest your money in various crypto projects intending to reduce risk if one doesn’t do well.

In addition to lessening risk, diversifying your cryptocurrency investment portfolio allows you to get the best potential returns—even when some of your portfolio’s items perform poorly. Savvy investors know that if they were to put all their eggs in one basket, this would be risky.

If you’re thinking of investing on a small scale, you should likely aim toward investing in two or three types of cryptocurrencies. However, suppose you wish to build an extensive portfolio. You might choose to invest in more than two or three digital coins, as that amount wouldn’t suffice for a sizeable portfolio.

Ready to get so rich that you can drink fancy French champagne in a bathtub full of diamonds? Okay, maybe that won’t happen, either, but you will be able to gain success by efficiently diversifying your cryptocurrency portfolio.

Strategies For Diversifying Your Investment Portfolio

There are several strategies you can use to diversify your cryptocurrency investment portfolio. These include diversifying by industry, geography, timing, and cryptocurrency. We’ll cover each of these now so you can decide which strategies will work best for you.

Diversifying By Industry

To diversify by industry, you’ll choose a variety of coins to invest in based on how they solve issues in various sectors. This diversification will help you mitigate adverse effects if crypto-unfriendly events and policies occur.

To use this strategy correctly, you need to conduct research thoroughly. This way, you can invest in both rapidly growing and stable businesses.

Additionally, it would help if you thought about competitive industries around the globe, like finance and medicine. Finally, it would be best to consider the overall profitability of certain enterprises.


Remember this rule of thumb: don’t invest in projects you don’t know much about.

Before you leap, take some time to learn and research the industries you’re considering.

Diversifying By Geography

Another way you can diversify is by geography. To do this, you’ll invest in cryptocurrency projects in your country or region and worldwide. Depending on your risk tolerance and preferences, you can choose a variety of blockchain projects that come from:

  • Asia
  • Europe
  • United States

When using this investment diversification strategy, you should ensure that your funds don’t all go to the same country or region. Instead, make sure to have a various investments from different places. To do this well, complete extensive research to understand which crypto projects are most successful in different areas of the world.

This will way you can ensure that your investments are protected from uncertainty regarding regulations.Additionally, this will allow you to balance your diverse portfolio even in volatile market conditions.

Diversifying By Timing

Even though this may seem like a new concept, diversifying by timing is a technique that’s been around for quite a while. Moreover, it is a dependable and proven strategy when done correctly.

To use this strategy, investors will need to time the cryptocurrency market, and at  right moment, acquire cryptocurrency assets. While it’s impossible to eliminate market risk when investing, this strategy allows you to enhance the value of your portfolio, as you are selective regarding where and when you invest.

This strategy is based on intervals. So all you need to do is to set specific money amounts aside. Then, you’ll invest these amounts at particular times on the tokens you choose to buy then. So, when cryptocurrency prices are low, you can use that opportunity to invest in the newest cryptocurrencies. Then, later on, when cryptocurrency prices are high, you can be in a great position where you’d be able to sell and make a profit.

Diversifying Your Investment Portfolio With Cryptocurrency

Of course, you can also diversify the types of cryptocurrencies you invest in. Because its approach is essential, this diversification strategy is familiar. When you participate in diversifying, the idea is that you are investing in a high-performing variety of cryptocurrencies.

Cryptocurrency projects vary because they have different technologies and foundations with which they’re powered. Because of this, you’ll have the option to select cryptocurrency projects corresponding to your investment objective. You can choose from various cryptocurrency types, including tokens, altcoins, and privacy coins.

When utilizing this strategy, you must research various aspects like future potential, past trends, and cryptocurrency prices.This next section will review some of the best cryptocurrencies for portfolio diversification.

Types Of Cryptocurrency

While Bitcoin is a popular coin, there are many others out there that you should consider investing in—especially if you want your cryptocurrency investment portfolio to be diverse. These include stablecoins, payment coins, utility tokens, security tokens, and governance tokens.


A stablecoin is a type of cryptocurrency that tries to track an underlying asset, such as precious metal or fiat currency. For example, there’s the stablecoin BUSD, which pegs the American dollar with a ratio of reserves that is 1:1.

PAX, also known as PAX Gold, does the same thing but instead ties its coin to the price that one gold troy ounce held in reserves has.

Even though you might not get huge returns on stablecoins, they are coins that provide stability, as their name implies.

Because the market of the cryptocurrency world can be volatile, having access to stablecoins such as these helps strengthen your investment portfolio.

Payment Coins

Even though there aren’t many new payment coins, you can still invest in some older ones. First, there’s the traditional Bitcoin option, which can be a bit pricey. Other options include Litecoin, Bitcoin Cash, and Ripple

Utility Tokens

Utility tokens work as the keys to using a product or service. For example, ETH and BNB are utility tokens. One of the many ways you can use utility tokens is to pay transaction fees you’d have to pay when using DApps or decentralized applications.

Additionally, many projects will use utility tokens to raise funds using a coin offering.

Theoretically, the token’s value should directly link to its utility value.

Governance Tokens

When you have a governance token, you can have a share of a project’s revenue or have voting power related to that project. These tokens are most common with Defi, or decentralized finance, platforms. Some examples include SushiSwap, Uniswap, and PancakeSwap.

Tips For Well-Balanced Investment Portfolio

Some tips for having a well-balanced crypto investment portfolio include splitting your portfolio among different investments with different risk levels, having some stablecoins, rebalancing when necessary, and more.

Splitting Your Investment Portfolio

To ensure that your crypto investment portfolio is well-balanced, you should split it into low-, medium, and high-risk investments. After all, a portfolio made up mostly of high-risk investments isn’t very balanced.

Even though this could mean more significant gains, it could also mean more considerable losses.

You can better determine what balance is best for you by considering your risk profile. 

Consider Stablecoins

If you hold stablecoins in your investment portfolio, these will help provide your portfolio with liquidity. In addition, because many stablecoins serve as the keys to many Defi platforms, they can easily and quickly exit a position or lock gains in.

Rebalance When Necessary

When necessary, it’s wise to rebalance your cryptocurrency investment portfolio because the cryptocurrency market is quite volatile. Make your investments wisely.

Allocate Strategy

To avoid the problem of overweighing a specific area of your portfolio, strategically allocate new capital. This way, if you’ve just made significant gains from a particular coin, you might feel tempted to pump more money into that coin.

However, do not follow this temptation. Instead, think about where you might be better off placing the money.

Research For Yourself

It’s also intelligent to complete research for yourself. Even though there will be other advice, there’s only so much advice you can follow. It is your money, so you’ll have to be responsible for it by doing your research. In addition, be sure to become aware of signs for how to spot scams.

Don't Over Invest

When creating a cryptocurrency investment portfolio, investing is easy. Sometimes, you might even want to over-invest, presuming that putting in a large amount of money could gain a significant return, making over-investing worth it. However, this is not a good idea. Only invest money you can afford to invest.

Your investment portfolio won’t be well-balanced if you stress how much you’ve put in to specific investments. The last thing you want is to end up in a position where you’re at a loss about what to do if your predictions about your investments aren’t accurate. As a result, you may end up with less money or valuable assets than expected.

Need More Information?

Now that you’ve learned how to diversify your crypto investment portfolio, you might need more information. For example, you may want to know which coins might be best for you to invest in or learn more about specific cryptocurrency-related industries.

Whatever information you need, we can help. At Byte Federal, we’re experts when it comes to cryptocurrency investing.

We also have many Bitcoin ATMs available across the country. To learn more about our ATMs, check out our ATM locations now.

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Jennifer Lawrence, the effervescent Creative Director of New Bytes, brings a fresh and innovative perspective to the crypto-focused publication. Hailing from the vibrant city of Austin, Texas, Jenny's intrigue in the intersection of design, technology, and finance was sparked during her time studying at the Rhode Island School of Design (RISD).

Jenny's commitment to clarity through design, her comprehensive understanding of the crypto universe, and her passion for making information aesthetically accessible contribute immensely to Cryptosphere's appeal and its engagement with a broad audience.