Diversification

Definition ∞ Diversification in the context of digital assets refers to the strategy of spreading investments across a variety of different cryptocurrencies, tokens, and blockchain-related projects. This approach aims to mitigate risk by ensuring that poor performance in one asset does not disproportionately affect the overall portfolio. Effective diversification involves selecting assets with varying risk profiles, use cases, and technological underpinnings. It is a fundamental principle for constructing a resilient digital asset portfolio.
Context ∞ The ongoing discussion around diversification in crypto often highlights the correlation between different digital assets, particularly during periods of market stress. Key debates involve determining optimal asset allocation strategies and the challenges of achieving true diversification given the interconnectedness of the crypto ecosystem. Future developments to watch include the increasing availability of diversified crypto investment products and the ongoing analysis of asset correlations.