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Why Diversifying Your Crypto Portfolio Is Important

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Every day, the financial news overflows with new stories about Bitcoin. Although the rise of Bitcoin is an important story, there are plenty of other cryptocurrencies worthy of your attention.

 

Diversification Is Important

 

If you’ve only invested in Bitcoin, you might feel a bit nervous about building a more diverse crypto portfolio. After all, human beings are naturally cautious about trying new things. However, diversifying is crucial in all types of investment. Just like you wouldn’t put all of your resources into one trendy stock, you need to learn about the new digital currencies making waves. If you invest in only one CC, a sudden drop in that coin’s value could essentially wipe out your portfolio. That’s why aside from diversification, it’s also very important to be in the loop for bitcoin predictions.

 

The Innovative Promise of Cryptocurrency

 

According to the experts at So-Fi Invest, “cryptocurrency is a digital currency that’s used exclusively online.” Although it is fully legal almost everywhere, CC is typically not issued, regulated or guaranteed by any government. Instead, CC is protected by a type of code called cryptography. Thanks to cryptography, you no longer need a government agency to prevent counterfeiting or fraudulent transactions. Bitcoin dominates CC so much that all other currencies are collectively called altcoins. Here are three of the most useful altcoins you can use to diversify your CC holdings.

 

1. Ethereum (ETH)

 

If you have even a passing interest in CC, you’ve probably already heard of Ethereum (ETH). Though it is based on Bitcoin, ETH is more technically sophisticated. This means that ETH transactions are far faster. This is likely to spur consumer adoption of ETH in the years ahead. Although ETH is a fine currency, it is much more than that. ETH is a decentralized software platform. This means that it allows you to run apps using a decentralized network of CPUs worldwide. The brilliance of ETH lies in the way it cuts out the middlemen between users and their apps. It also allows developers to have greater control over their app creations. Hypothetically, ETH could be used to create transparent replacements for banks, loan providers and insurance providers. ETH can be used to verify and confirm any type of financial product you can imagine. Currently, ETH is primarily used as a currency and an investment asset. However, ETH has the potential to become part of the vital infrastructure of the Internet.

 

2. Ripple

 

Ripple is a relatively new currency that has gained a lot of attention relatively quickly. Uniquely for CC, Ripple was creating by a consortium of traditional banking institutions. Because of its institutional origins, Ripple isn’t quite as “sexy” as certain other cryptocurrencies. Nevertheless, Ripple’s institutional backing speaks well for the long-term future of this CC.

 

3. Litecoin (LTC)

 

Launched back in 2011, LTC was one of the earliest cryptocurrencies to emerge in the wake of Bitcoin. This early start gave LTC a definite advantage in terms of user adoption.

 

Diversifying protects you against dramatic shifts in any particular CC value. As you learn more about altcoins, you’ll discover that Bitcoin is only the entryway into the wide world of crypto.

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