Talking about diversification, I'll rather diversify to another investment than investing in other Cryptocurrencies asides Bitcoin, at least one could still use some portion of the profits from other investments like Real Estate, Commodities to continue building their Bitcoin Portfolio.
If we check the performance of bitcoin over the last decade, you will notice that bitcoin is the most performing asset in terms of ROI. Bitcoin has given a better return than real estate or any other investment that you will think of. Sometimes when I hear people say that they want to take profit from their bitcoin investment and diversify to other investment it baffles me. Does it really make any sense that you are disposing the most performing asset to diversify to other things that can't give you half of what bitcoin will give you if you continue holding bitcoin.
I will rather stick with bitcoin than diversify to any other investment. As an investor if you think you have gotten enough bitcoin that's enough for you at the moment. It will be best to stack up cash, as diversification. with your bitcoin and cash deposit you are far better off than diversifying to real estate or anything else.
It does not hurt to diversify investments after you have already reached decently large size of investments in bitcoin and cash, especially after you might have several years worth of expenses in bitcoin and/or cash.
Diversification is a discretionary matter, and it becomes more justifiable the larger your investment portfolio becomes.
When you are first investing, and maybe even the first 4-10 years or more, you might not need to diversify since you are still in the early stages of building your investment, and maybe after 4-10 years or more you start to get to a point of having 1 year or more worth of expenses invested into bitcoin, and if bitcoin had appreciated in price too, then you might have even more years of your expenses in bitcoin and cash, and at that point it seems to make sense to put value into other areas, such as stocks, bonds, properties, commodities and perhaps other areas, and again surely discretionary regarding how to allocate, reallocate or into what to diversify in the even that you want money in various areas and also you might also want your money to be working for you rather than the portion in cash might not be working for you and so once you have even 6-12 months of your investment in cash, you may well want some of that to be working for you, since maybe if you have an emergency you might only need 3-6 months of it, and even if you need more months, you would not necessarily need to access those funds right away but instead several months down the road so some extra funds could be tied up or invested in various other areas in which you would spend your other investments prior to spending your bitcoin.. .
Not easy answers and can become more complicated to generalize how to deal with such situations when the situations of people will likely end up varying after they start to accumulate more assets/investment and wealth and different ways to deal with volatility of bitcoin and even volatility of a variety of markets.
So when we frequently talk about diversification for the mere sake of diversification as dumb, it especially applies to newbie investors who may well be getting distracted by ideas of diversification when it is not needed in the early stages, but diversification does start to make more sense after accumulating more wealth.. even though it is still quite discretionary and varied in the ways that any bitcoiner might end up diversifying... including that there are some bitcoiners who come brand new into bitcoin, but they had already had various other investments in other assets (so they might come to bitcoin already largely diversified), so they are in a different position if they either already have a diversified portfolio or if they come to bitcoin and they have a lot of wealth, then they have more options in which diversification might be one of their considerations, which might not make much if any sense for most newbies who might be DCAing into bitcoin and don't even have very much already accumulated wealth.
I think it makes more sense the way you have explained it. Because often times I have seen and heard new investors that are just starting life and are new to bitcoin investment talks about diversification. Not that they have amassed so much wealth or have spent a reasonable number of years in accumulating bitcoin. But you see them talking about diversification. Of course if an investor who have spent the number of years as you mentioned above and has accumulated enough wealth and bitcoin wants to diversify I don't see anything wrong with that as well. My initial stand was for new investors who are still starting life and hasn't really achieved much in bitcoin and cash deposit who often talks about diversification. I should have mentioned of this in my first post, so that anyone who read it will a clue of class of investors I was making references to. It's my fault I left the post open, without narrowing it down to new investors who are just starting life in bitcoin investment and haven't gotten any wealth prior to investing in bitcoin. I totally understand everything you said and it's makes sense.