As the crypto market dips from all-time highs set in Q1 this year, investors and traders alike are looking for diversification options to save their portfolios from total collapse. Despite the sudden market downturn, which has seen some altcoins lose as much as 70% of their value, staunch crypto heads remain convinced that this asset class will outperform traditional financial asset classes in the future.
Perks and headaches of diversification in crypto
As such, diversification is the key to preserving investors and traders wealth when volatility increases. For example, during the massive bull run of 2021, having a portfolio of Bitcoin alone would return 84% from Jan 1 2021 to Apr 30, 2021. If you held a diversified portfolio with altcoins during the same period, you would have a better return than holding a single asset in BTC. Ethereum (273%), Dogecoin (6416%), and XRP (536%) are just some of the altcoin examples that yielded more than BTC during this period, according to Coingecko.
Despite its advantages, diversification also has its fair share of headaches. While profit optimization and risk management are enhanced by selecting a basket of crypto options, selecting individual assets could pose a challenge. The crypto asset spectrum varies widely, which could lead to massive overheads in terms of required due diligence, laborious project research and costly transactions.
Additionally, investors could also lose some of their profits by switching to various assets on different blockchains via paying high protocol fees. As such, crypto investors and traders are left with a dilemma when trying to diversify their crypto asset pools.
“Diversification on one token”
To help investors achieve diversification of their cryptocurrency portfolio, YDragon has come up with a solution. Clients can invest in a YDragon index (such as BSCX for the top reputable currencies on Binance) to achieve a more diversified crypto portfolio.The service will go live in August of this year and offer a range of options for those who seek to explore high-performing cryptocurrencies.
“Holders of YDragon indexes can generate high yield, passive income on collateralized assets through our staking platform.”
The platform introduces a new investment strategy that will combine multiple assets and yield farming protocols to offer the highest returns. Built on smart contract technology, YDragon automatically invests in an index of carefully selected assets and yield farms then redistributes the returns to the investors. At launch, a BINANCE Smart Chain (BSC) index, minting the top reputable (BSCX) assets on the chain, will be available to investors – with other blockchains including Avalanche, Polygon, and Polkadot still in production.
“YDragon is a much needed lighthouse in a sea of treacherous waters.” said Mujtaba Arbi, YDragon Chief Innovation Officer.
A new future look for crypto investors?
For cryptocurrency investors, diversification is important to maximize profits and minimize losses. However, optimal diversification increases the challenges of investing in crypto and eats into your profits as the number of assets increases. Moreover, having to keep up with tens of crypto assets on different blockchains and yield farming platforms will continue to become increasingly stressful.
The rise of single-asset diversification techniques is set to solve the persistent diversification challenges present in the cryptocurrency space and may force more investors to adopt the strategies as they look for simpler solutions. At a minimum, diversifying crypto holdings with assets that earn a passive income through a yield and assets that deliver value through price increases the overall portfolio yields over time.
Are these well-diversified assets set to be the future of crypto investing and trading?
