Diversification In Crypto is Killing Your Gains, Do This Instead

Like just within the top 2, you would've like completely overtaken everything else here, right? This is how distribution inside of a bull market works. You're investing into crypto for one major reason, that is to take advantage of the life-changing gains that happen in a bull run. And you do not do that by adopting a mindset that you want to minimize risk. We often think that in order to minimize risk in the crypto markets that can literally go to zero in a blink of an eye, we need to diversify our portfolio. Or as they say, never put your eggs in one basket. But in this video, I'm going to share with you why it's actually a really bad idea to diversify your portfolio and why doing so actually hurts you more than it helps you. And I'll also talk about why over-diversification is one of the worst mistakes that rookie crypto investors tend to make that really, really prevents them from making the life-changing money that they always hear people talk about when they talk about a crypto bull run. Now, these are the lessons that I've learned after spending 2 full crypto bull runs, not making the money. That I was promised by the people that got me into crypto. And they say like, oh, it's so easy to make life-changing money, but like didn't get that result. And one of the biggest reasons why I didn't, especially as a rookie back then, was due to over-diversification. So these are lessons that literally took me, you know, quite a long time to learn and caused a lot of pain in the process and just slowed down my progress by a lot. And hopefully by watching this video, you will be able to skip that learning curve and have a higher chance of making life-changing money with the remaining time that we still have in this bull run. Now, I'm not only going to share why diversification is a really bad idea if your goal is to make life-changing money in a bull run, but I'll also give you an optimal portfolio allocation strategy that I've learned over the years that strikes a perfect balance between minimizing risk and maximizing your reward. And before we get into it, hello, my name is Shwin. I'm currently on a mission to create the world's best crypto trading education suite by making trading easy for everyone. But otherwise, let's get right into the video. So first things first, we're going to get into why diversification doesn't work. And I first want to cover is that it really cripples your gains. Now, before I get into why diversification doesn't work, I think it's important to just understand the thought process behind why people tend to over-diversify. And I think it boils down to 2 main things, and correct me if I'm wrong. Number one is to minimize your risk. As a traditional investor, or maybe you've read some investing books, or maybe you've just listened to some investing advice, and they always say never put all your money into one basket and always diversify. And so you bring that same mindset into crypto, which is a completely different beast. Now, just to explain what that means, crypto is very different from a traditional company in the sense that there is no real use case for crypto. I know there are grandiose visions of crypto changing the world and changing finance as we see it, and to bring decentralization to the companies and to the banks and stuff like that. I know that that is what crypto was made for, but the reality of the matter is that for 99% of the cryptos out there at the moment, they are nothing but glorified shitcoins. They have no real use case, and the only thing that is behind why they market cap is that high is that there are a lot of people that seem to believe that it has some kind of use case and hence put money into it. So crypto is basically a game of who's the bigger fool. It's a game to see who is the last one holding and who gets to cash out their profits when it's at the top. You can also say that crypto is just a huge Ponzi scheme. And this is different from real companies where they have a use case. They are actually providing value to society by providing either some kind of service or some kind of product. And in contrast to crypto, that's different. And what you need to understand is that 99% of crypto and pretty much just actually all crypto will lose the majority of their value once we get into a bear market. Once the money stops flowing into the crypto markets, once people start losing interest, once enough people have cashed out and there's no reason for them to still continue going back in, the party's over. Like just look at even the last bear market, which is like the most recent one from say 2022 to 2024. Like just look at Bitcoin, for example. It went pretty much from $69,000 and down to what, 77% over the course of a year. Like if you tell me that a real life, like traditional company is doing this kind of just loss of value, I would say that that company probably is a really terrible company and it's probably shit and it's probably not something you wanna invest into. Like, okay, Bitcoin is the largest one. Let's look at just even a random one like Solana, right? Solana in the last cycle was huge and continues to be huge and it lost 97% of its valuation. It went from $265 down to $8. And these, by the way, are like good coins, right? Like even look at Ethereum, right? You cannot argue that Ethereum is one of the most like useful coins in all of crypto in the sense that it is powering thousands of protocols and is a really huge reason why crypto is able to even function. Solana and Ethereum are those types of coins that actually have a real use case, tens of thousands of users daily. And yet even Ethereum lost 81% of its valuation throughout the bear market. Even you look at AVAX, right? AVAX was You know, pretty big as well in the last bull market, and it's also a token with utility, and it lost 93%. And like you don't even have to get me started on what happened to the meme coins because the meme coins that have zero use case, like boom, right? Solana, Dogecoin, completely different types of crypto. One is way more useful in terms of utility. Boom, 93%. This is what I want you to understand about crypto is that eventually it will all go to zero. It doesn't matter if you diversify into 20 coins to like spread out your risk. Those 20 coins are going to go to zero eventually. So you are essentially Essentially just like spreading your money out into 20 things that will do the same thing eventually, right? That's not diversification. If you're investing in crypto, you're investing into crypto for one major reason. That is to take advantage of the life-changing gains that happen in a bull run. And you do not do that by adopting a mindset that you want to minimize risk. Now, you don't have to go the opposite side of the spectrum and try to maximize risk instead, but diversification, or rather over-diversification, is a really terrible way to approach making life-changing money in a bull run. And the second main reason I believe that most people tend to over-diversify Is to be able to spread out their exposure into multiple narratives. So you don't want to just be in gaming, for example. You also want to have some AI, and then you want to have some layer 1s, and then you want to have some Bitcoin, then you want to have some of this other thing. It's just, there are so many shiny objects in crypto and there's always so much going on and every coin seems to be pumping every day that, you know, you feel a lot of FOMO and you want to be able to have exposure to all of these different narratives. And that is also a really bad idea as well, which I'm going to start getting into right now. When you start exposing yourself to way too many things, first of all, you cripple your gains. Because I want you to imagine for a moment, if let's say you are diversifying into 20 different coins, what you're doing then is that you're spreading your account most likely around 5%. Like each coin will probably hold like between 2% to 5% of portfolio if you are investing into that many coins. Now, let's say that out of these 20 coins, you have 2 that does a 50x, for example. Well, guess what? If your coin, like if let's say you've only invested like 2% because it was a relatively small cap at the time that you didn't wanna risk too much money investing in a coin that wasn't proven yet. Let's say you only invested 2%. Even if that coin did a 50x, quite literally a life-changing amount of gains, right? If I were to invest $10,000 and it does a 50x, I have half a million dollars. But the fact that you were so overdiversified, you only invested 2% of your portfolio. Guess what? You just got 100% of your portfolio back because 50 times 2% is 100%. Even in the best case scenario, you would've only gotten 250%, right? You see what I mean when I say investing into too many coins just cripples your gains? Like, even if certain coins do well, you're not allocating enough money into those plays to be able to reap like a really meaningful life-changing amount of money. And that's one of the problems with overdiversification. The second is that when you invest into way too many coins, it's hard to keep track of. Like, imagine if you were invested into 30 different coins in like 10 different narratives. How would you be able to keep track of, for example, the news events that are going on, the developments within that narrative, whether or not that Coin that you invested into has fallen out of favor with the narrative, or like maybe there was some really terrible news, or like the team switched or whatever, and you know, it's just not worth holding anymore. Like, it's impossible to keep track of. I'm not even able to keep track of everything that's going on at the same time, and I've been doing this for like 5 years. Who are you to assume that you would be able to keep track of all of this? And I just want you to think back for a moment. How many coins in the past have you bought that you don't even remember buying, and you don't even remember why you bought that coin, but somehow, for some reason, it's sitting in your portfolio and it's Down like 90% and it hasn't yet recovered in any sort of shape or form. Think back to those coins. Do you have a coin like that? If you do, then you've probably fallen prey to overdiversification and just FOMO, just adding exposure to narratives that not only you don't understand. Doesn't take a genius to know that this sort of behavior doesn't generate life-changing gains. It's just not a smart thing to do. But what you do want from crypto and the way to get, like truly get amazing results out of crypto, because this is such an amazing industry where you can go from zero, like you can be nobody. You have just as good of a chance as the average Joe next to you or that millionaire who's sitting on a beachfront apartment somewhere in the world to make life-changing money and to grow your wealth exponentially throughout the course of the bull run. But the way that you're going to make that a reality is by finding a strategy where not only are you able to diversify yourself enough to gain exposure into multiple narratives so that you're not just putting all your eggs in one basket, at the same time, not too much to the point where you are too overly diversified And you spread out your gains too much, or you just have too much to keep track of. So the way to do that is, this is a strategy that I came up with. It involves having alpha and beta plays. Essentially just have between like 5 to 7 narratives, main narratives that you truly believe that it will perform well during this bull run. And then from those 5 to 7 narratives, you want to have an alpha and beta play for each narrative. So the way that this is going to look like is, for example, let's say this is narrative 1. Let's say it's AI. And my alpha play in this case is, let's say it's TAO. And my beta play for this Is, let's say, Arkham. So what, like at this point you might ask, like, what is the difference between an alpha and beta play? Well, an alpha play is simply a play that is already much more established, usually much higher in market cap, and is essentially just a surefire bet that if this narrative were to perform well, like the alpha play is just gonna do well, right? It's almost a no-brainer that if the narrative does well, it's almost 100% certainty that this alpha play will do well. So an example of a meme coin alpha play would be Dogecoin, for example. Meme coins take off. Well, it's a very good chance that Dogecoin also goes up. Now, a beta play on the other hand is a play within the same narrative that is usually a lot less proven, a lot lower in market cap, but profit potential is a lot higher, right? A lot higher ceiling, a lot of a lower floor. This is the best way that I can explain it. And having exposure to both means that you have the best of both worlds. You have the surefire play where it's very low risk, but also not too high of a reward. And then you have some of your money inside a beta play where it's very high risk, but potentially very high reward. And this is where I also get into the narrative part, which is why 5 to 7 in Well, at any given point, I do think that more than 15 coins in your portfolio is like— 15 is the cap that I would like just put at. Anything more than that and you're truly, truly spreading yourself way too thin. Like, even 15 is like quite high up there. Usually 10 to 12 is a much better number to where you have a sizable amount of money in each narrative and each play. And if any one of them were to take off, well, guess what? You're going to be making some pretty good money. And also one other thing to note is that in every bull market, like a handful of narratives that are responsible, that basically account for the majority of the gains throughout that bull run. In the last bull run, we saw layer 1s that took off, right? Solana basically did 100x, AVAX did a 50x, BNB did a 50x pretty much, or like a 20x. Like layer 1s, right? They were one of the top narratives. You had gaming with AXS, you had Axie Infinity, you had Gala, Sandbox, Mana. All of them basically did like 20 to 30x. And then you had also DeFi, which did really well, right? Like it's just like a handful of narratives. If you just made a bet into any one of these narratives, you would've done amazingly well. In the last cycle, gaming and layer 1s was that for me. And one of the main reasons why I was able to grow basically $20,000 to $1.1 million just in the last bull run alone was because not only did I allocate myself into 2 of the top performing narratives in the last bull run, which is layer 1s and gaming, but I also allocated a sizable chunk of the portfolio and not like spread myself too thin to the point where even though that narrative took off, I They didn't have enough money inside, right? And that's a big reason for my success. And if you look back even to the 2017 bull market, you have, you know, ICOs, which is very notable. You had the Bitcoin, you know, sort of clones or like stuff that's trying to replace Bitcoin. Like those were really big narratives back then, but completely fell off the wagon in 2021. Just to give you an idea of how many of the old narratives never make it to the next narrative, I believe there was an observation done where like out of the top 50 coins in the 2017 bull run, only 8 of them even made it, like maintained this spot in the top 50 by the end of the 2021 bull run, right? A lot of these coins fade into obscurity. That's why, like earlier on I mentioned that every crypto is just a glorified shitcoin and it's essentially just a Ponzi scheme. And you never wanna be holding onto these as like quote unquote investments, right? You're here to make money. And once you make that money, you take your money and you run. That is how crypto works. And if nobody has ever taught you that before, now you know. If you go into this current bull run or whatever's left of it with this mindset, you will win. Or at the very least, you will come out of this cycle heavier than when you got So when you spread yourself out over 5 to 7 narratives, you'll have a pretty good shot at catching one of these top performing narratives. In fact, there is a very good website that you can use to just keep track of the top narratives that's been performing well so far. And so far this bull run, I can confidently tell you that memes have been the top performer so far and will continue to be a very top performer, like big performer. You have real-world assets, which are a very new thing in this, you know, in this bull run specifically, and they are one of the top performers and they will continue to be a top performer. You You have, for example, liquid risk-taking protocols, which is essentially DeFi 3.0, which has also been doing exceptionally well, as you can see here. Like these are narratives year to date by far and ahead. Number 1 is meme coins. Number 2 is layer, like LSDs. Number 3, world assets. Number 4 is identity. Number 5 is account abstractions. No idea what that is. And then AI. So I can confidently tell you that, you know, AI will be one of the biggest narratives this time around. But you can see how out of the 25, like different narratives that you can potentially invest into outside of the ones that are absolutely doing horrendously, you have pretty much 6, right, that account for the majority of the gains, like more than the majority of the gains. Like just within the top 2, you would've like completely overtaken everything else here, right? This is how distribution inside of a bull market works. This is just like how real life, you have the top 1% earning 80% of the world's wealth. And even amongst the top 1%, like just the top 20% of the top 1%, they also own 80% of all the wealth that is present in the top 1%. I hope that doesn't confuse you, But this is just the way life works and this is the way crypto works. You do not need to diversify yourself into 20 different narratives because like there are only like a handful of them that will outperform the markets by a very sizable margin. And so 5 to 7 narratives just gives you a really good shot at catching those. And then, so you essentially like, this is the blueprint. You have 5 to 7 narratives that you pick, stick closer to 5 if possible, but if you have more that you're just interested in and want to invest in, like sure, go for 7. So 5 to 7, and then in each one you want to have an alpha play, basically a higher market cap play. That is very high floor but low ceiling. And then you wanna have a beta play, which is low floor but high ceiling. And this gives you a really good balance of not only minimizing your risk, but also maximizing your reward and just keeps you within the optimal range of diversification where again, you're just minimizing risk, but also maximizing your reward. And then you just repeat this, right? For whatever narratives that you pick. So let's say narrative number 2 is you want real-world assets. Like alpha would be Ondo and beta could be Token or TrueFi, right? Could be either one of those. And then you just repeat this blueprint until you complete your narrative. And boom, you just have a really optimally allocated portfolio that will maximize your chances of making life-changing money this bull run. By the way, if you are in this bull run right now and you are struggling or just not seeing the results that you thought you would see from a crypto bull run, and you want to take advantage of this bull run before it's too late, feel free to check out the first link in the description box below. It's just a website that shows you how my service is able to help you solve your problems. If this is relevant for you and you'd like to take advantage of all of this before it's too late, then the link is there whenever you feel like clicking on it. 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