The cryptocurrency world, though poles apart when compared to the traditional investment and trading one, has more similarities than you can think of. Yes, the financial instruments of DeFi have enabled profiting in ways never thought imaginable, but in the end, trading and investing have a few ground rules that are common to both.
Profiting strategies, for example, still follow the basic rules of buying low and selling high. Derivative markets allow for enjoying increasing wealth even in bearish markets as you can short your orders. But all these advantages are not the only thing. A part and parcel of all this is the negative side of the similarity.
Eggs in a Basket
Ask any seasoned investor or trader and they will tell you the key to a good strategy is not to put all your eggs in one basket. Diversification is perhaps the most important tool of all. You could put all your money in one asset and find that you end up with massive losses if it falls.
Diversification is a method to avoid this risk by distributing your money in different assets, preferably that have little to no (or negative) correlation. A lower correlation means that the two (or more) assets you invest in will not move up and down together and this can essentially protect your portfolio price. If one asset goes down, chances are that an unrelated one will not and you can always use that to sell or trade for profits.
YDragon Helps in Crypto Diversification
Traditional investment diversification requires people to either directly delve into it (an extremely time-consuming process that requires constant attention) or use a portfolio manager (an intermediary who eats into your profits). Within the cryptosphere, this is all changed, thanks to the YDragon platform that uses the latest in smart contracts to do the tough work for you.
One of the first offerings YDragon has is the B5 index token, which will represent the top 5 Binance Smart Chain reputed projects. Through the B5 token, users of YDragon can buy a single token and the platform strategically invests in the top 5 BSC projects on their behalf. This creates an automated diversification, reducing chances of losses. At the same time, the investments will also leverage DeFi yield farming to offer investors passive income on their index tokens..
YDragon also has plans to expand to other chains in the future, offering a true cross-chain diversification experience.
The Crypto Diversification Dilemma
The crypto investment sector, though very similar to the traditional one, has one major difference in terms of diversification. There are thousands of tokens whizzing around today and has even attracted mainstream investment as more and more traditional investment advisors are dabbling in it. For an individual, this can be really difficult as it requires intense research to decide on how to set up a portfolio.
One way is to play it safe and invest only in the most famous ones, such as Bitcoin, Ethereum etc. This ensures relative stability, but the top ones are also prone to having a strong correlation and that can mean increased chances of losses as all cryptos in the basket will have a tendency to move together.
The other method one can use is to search and do a lot of due diligence to find the ones that have the potential of really rising. But the thousands of tokens (CoinMarketCap, the largest listing has over 5000 tokens listed that are increasing every day) mean it is not only impractical but statistically near impossible to do. With an estimated $17 trillion market by 2027, the YDragon platform seems to be the best choice for crypto investors at the moment.