You are right that the correlation between bitcoins and the alt coins is very high. That is why our investment into crypto currencies should be a large part into bitcoins. The diversification doesn't really work here, but it works in a broader spectrum like you diversify out of stocks, bonds and other investment funds. So bitcoin alone is already a diversification from your conventional assets. In my opinion diversification becomes important again when investing into alt coins, because when one alt coin is going to drop in price then this is not pulling down any of the other coins. Alt coins are much more risky and if we spread out our money across multiple coins the risk profile is much lower.