A diversification strategy is a method employed to reduce risk by spreading investments across various assets or asset classes. This approach aims to mitigate the impact of poor performance in any single investment by balancing it with potentially positive returns from others. It is a fundamental principle in financial management applied to portfolios of digital assets and traditional investments alike.
Context
In the context of digital assets, diversification strategies are a recurring subject of analysis, particularly during periods of market volatility. News often reports on how institutional investors and retail traders are adjusting their allocations across different cryptocurrencies, stablecoins, and DeFi protocols. Discussions frequently center on the correlation between various digital assets and their effectiveness in mitigating overall portfolio risk during market downturns or upswings.
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