Diversification is Good, could be considered one of the best strategy of investing, your approach was what was wrong.
Never place all your egg on one Basket no matter how much you trust a project.
Investing in Bitcoin and Shitcoin is not diversifying, it's more of placing some egg in a basket and another where giants could fight this destroying the egg
This would reduce the benefit of the Good basket.
Personally, I prefer diversifying but only invest in Bitcoin as a Cryptocurrency and dabble in some stock and lil land (though you can't do DCA in this).
Investing in Bitcoin and shitcoin is like farming tomatoes and rearing chicken in same place.
I don't like investing in shitcoins at all. All coins outside of Bitcoin are considered shitcoins. I totally agree with you, don't put all the eggs in the same basket if it's different. Similarly, diversifying the same portfolio is not a good choice. It can cause damage.
Every individual has freedom in investment. If a person wants to invest in SHITCOIN he can do so at his own risk. Although no one follows the rules of investing in Shitcoin, it would be wrong to call it an investment. Shitcoins are mostly traded, so you can keep a separate portfolio for Shitcoin and one for Bitcoin.