BTC, XRP, ETH, LINK, etc: Is too much crypto in your portfolio a problem?
They say you need to be brave to invest in cryptocurrencies.
In a market where price changes over 10 percent and pump and dumps are a common occurrence, a bit of safety shouldn’t go amiss. Yet, there’s a lack of it. Crypto investors are not just dipping their toes into the cryptocurrency markets, they’re taking the plunge with no paddle to pull them out if they too deep.
According to a survey by cryptocurrency exchange Huobi shared with AMBCrypto, digital assets are the primary avenue of investment for retail investors. Among the 491 respondents to the survey only 1 in 3 invest in traditional stock as a corollary to their cryptocurrency investment, and less than 1 in 10 invest in fixed-income securities like government or corporate bonds. However, beyond the big two investment avenues of stocks and bonds, there’s a bit of diversification, around 1 in 4 respondents look for other forms of investment like real-estate, foreign exchange, or investment funds. But rather, they are predominately into cryptocurrencies.
In terms of allocation to cryptocurrency, nearly every other respondent plans to invest at least 10 percent to 30 percent of their annual income into digital assets and 1 in 4 intends to allocate more than 30 percent. This is clearly higher than the 2.5 percent stake that most money managers advise to put into Bitcoin or other top cryptocurrencies.
Commenting on these figures Ciara Sun, VP of Global Business at Huobi told AMBCrypto,
“These findings aren’t surprising but they do solidify our belief that digital assets will continue playing a significant role in the future borderless economy and help drive global financial inclusion.”
While these numbers do point to the bravado and the trust cryptocurrency investors have in the market, it does point to the maturation of the market as well. Diversification is an important aspect of any portfolio, but this can be done in a complete digital assets portfolio as well. Asset-price safety can be achieved through investing in stablecoins, either fiat-collateralized stablecoins like Tether, or crypto-collateralized stablecoins like DAI. Recurring income investments like yield-focused bonds can be mimicked by investing in liquidity pools or by lending out idle cryptocurrencies. And the kicker, hedging can be achieved with pretty much all forms of decentralized currencies, because that’s what they are meant for.
So, is this sort of lack of traditional finance diversification hurting the cryptocurrency market, or helping it become more mature? Well, we’ll have to find out.