People have always loved wasting their time looking for the next Bitcoin. Convinced that Bitcoin will be replaced in the future by Altcoin, these people want to hedge against the risk of Bitcoin failure by diversifying with Altcoins. These people do not understand what the real risk is with Bitcoin. In this article, I will explain to you why diversification with Altcoins is a pure illusion in the world of Bitcoin.
Bitcoin, crypto, undisputed king
Bitcoin is the undisputed king of the crypto world. There is real consensus on this fact, which Bitcoin’s dominance over the entire cryptocurrency industry confirms.
On the other hand, Altcoin fans believe that Bitcoin will not remain this famous undisputed leader in the future. To the boss of the exchange Binance, who firmly believes: “Bitcoin will end up being outperformed by better than him.”
Among the supporters Ethereum, many believe that a reversal of dominance between Bitcoin and Ethereum will occur in the future. This hypothetical event even has a name, since Ethereum fans talk about “Flippening”.
The great illusion of Flippening
For this Flippening to take place, the Ethereum market cap would have to take precedence over that of Bitcoin. To give you a better idea of what this represents, you should keep in mind that Ethereum currently has a market cap of 34 billion dollars, while that of Bitcoin is of the order of $ 182 billion.
It shows you how far you have to go before such an event can take place..
Nevertheless, a lot of people believe in it. Many even go further, believing that Ethereum itself will be dethroned by another cryptocurrency. A kind of Flippening of Flippening.
Some see EOS or Cardano take over Ethereum in the future.
The big question I invite these people to ask themselves is this:
How could a Flippening take place if Ethereum itself is not able to maintain its leadership position in the field of smart contracts and decentralized applications?
I’ll let you try to answer this question yourself. For my part, the answer is already found. So I only buy Bitcoin.
Some want to hedge against risk by diversifying with Altcoins
That being said, many feel that it is important to diversify their portfolio into cryptocurrencies. To convince themselves of the importance of doing so, these people will refer to what is done in the world of traditional finance. In the stock market, it is customary to invest in companies in different industries.
Some companies have cyclical activities, this allows you to protect yourself from the decline of some, while others will be up.
This approach is however criticized by some among whom Warren Buffett in person. Renowned as one of the greatest investors of all time, Warren Buffett frequently explains that diversification isn’t a must if you know what you are doing:
“Diversification is a safeguard against ignorance. It doesn’t make a lot of sense if you know what you’re doing. “
In the stock market, such a strategy can make sense. However, it cannot be so relevant in the world of cryptocurrencies.
Some seek to diversify their portfolio in cryptocurrencies by thinking that alongside Bitcoin, they will buy:
- Ethereum which is the leader in smart contracts and decentralized application platforms.
- Project tokens Basic Attention Token which offers an innovative advertising model for the Web.
- NEXO which is a platform offering instant lines of credit
- Tokens Enjin Coin of the Enjin platform, which presents itself as the leader in Blockchain gaming.
I see a lot of questions on forums from people asking if their allocation like 50% Bitcoin, 20% Ethereum, 10% BAT, 10% NEXO, and 10% ENJ is relevant for the future.
The allocation percentages will vary from person to person, as will the selected Altcoins, but you get the idea.
These people will feel reassured that they have implemented a diversification strategy with Altcoins alongside the Bitcoin they have held since the start of their cryptocurrency adventure.
Diversifying with Altcoins does not protect you from real risk
I will surely disappoint some with what I am going to tell you here. You have to open your eyes. You must understand that this diversification with Altcoins is just an illusion in the Bitcoin world.
The fact that these cryptocurrencies at first glance operate in different sectors does not constitute effective diversification. It does not protect against real risk in the world of cryptocurrencies.
What is the real risk in the world of cryptocurrencies for all Altcoins?
If Bitcoin were to fail in its revolution, then all Altcoins would fail too. No Altcoin could survive without Bitcoin. In fact, you are not diversifying yourself against the potential risk of Bitcoin failure by buying Altcoins.
This diversification with Altcoins that gives you a sense of security is just an illusion that you absolutely must get out of to take full advantage of the Bitcoin revolution.
All the cryptocurrencies that are created are just attempts to prove that the Blockchain can be used successfully for something other than Bitcoin. Altcoins that claim they can replace Bitcoin with supposedly superior technology will sooner or later fail.
Their marketing teams will try to make you dangle wonders. However, you should not lose sight of the fact that the unique invention already took place on January 3, 2009. This invention is naturally Bitcoin.
The revolutionary invention is Bitcoin
Bitcoin is more than a cryptocurrency, it is the internet money protocol. Bitcoin is a unique invention in the history of mankind. Altcoins that seek to seduce you, and profit from your propensity to let greed blind you, arrive too late. The real revolution has already taken place: it is Bitcoin.
Sooner or later, Bitcoin will be able to meet all the uses that some Altcoins implement and that Bitcoin does not yet implement.
The developer community the brightest is around Bitcoin. Services will be added around the Bitcoin Blockchain to offer smart contracts in the future. Likewise, if decentralized finance goes beyond the mere fad it is currently in, services will be offered above Bitcoin sooner or later in the future.
Diversification with Altcoins is a pure illusion
The main thing you need to remember if you ever think about buying Altcoins to diversify yourself is:
There is absolutely nothing that other cryptocurrencies in the market are doing that Bitcoin will not be able to do in the future.
Starting from this premise, which should become a golden rule for you, you will realize that there is good faith in all that diversification in the world of cryptocurrencies is absolutely useless.
To paraphrase Warren Buffett, this diversification that some absolutely pursue it is only a protection against ignorance. This famous ignorance on the fact that Bitcoin is the real revolution.
Once you understand that Bitcoin is the real revolution, you will be able to focus only on Bitcoin to avoid wasting your time and money on Altcoins, which are frequently referred to as Sh * tcoins. This name obviously does not owe anything to chance. As for the myths of low cap altcoins supposed to make you rich … that’s just a myth.
A developer by training, I discovered Bitcoin in 2014 but did not immediately grasp the importance it could have for the world of tomorrow. I took a more in-depth look at it from the start of 2017 and I haven’t let go of it since.
Passionate about Bitcoin and the new system it is trying to build for the future, I decided to participate in its evangelization at my modest level by writing about Bitcoin, Blockchain and cryptocurrencies on different media.
It is with pleasure that I publish some of my texts in French on The Coin Tribune.
I also write quite a bit about personal development and self-improvement.
Please feel free to connect with me via social media or in comments on my articles if you have any questions regarding my articles.