Why Diversification Matters for Crypto, Too

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Connor is CEO and Co-Founder of Truvius, an investment platform bringing systematic, theme-driven portfolios to digital assets.

Long-standing and generally accepted financial theory shows that diversification is not only good, but improves expected returns per unit of risk.Unfortunately, the crypto space currently seems to be overlooking this principle., AQR co-founder and CIO Cliff Asness rebuffs a recent paper that effectively poses the question,"Why not 100% equities?" — a style of thinking that tends to resurface during bull markets.

Let's examine four hypothetical crypto portfolios going back to 2018: Bitcoin Only and Ethereum Only , an equal-weighted allocation to Bitcoin and Ethereum , and a passively weighted portfolio of the top 10 non-stablecoin assets in any given month .The Bitcoin Only and Ethereum Only portfolios produced highly similar annualized returns of about ~30%, but Ethereum Only exhibited higher volatility, resulting in worse risk-adjusted performance compared to Bitcoin.

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