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It's not everyone that invest in shitcoin knows that it's not a good investment. Some new investors don't male research or are being misled by other shitcoiners to invest in shitcoin that it will be the next bitcoin. I was once a victim of investing in shitcoin in my early days in the cryptospace but as time passes on after a big loss, I didn't give up but continued with my research till I found bitcoin and my worries ended.
However, diversifying into shitcoin isn't the best after you have reached your over accumulation stage, because shitcoin is in the same line with bitcoin and bitcoin controls their prices as the one and only unique cryptocurrency. If you must diversify, it should be into a different asset entirely like bond, stock, shares, equity and cash equivalents. The reason for diversifying is to have other asset to put your funds into for more confidence, so that if one is not doing well, the other can make a balance.
The idea behind diversifying is to attempt to have assets that are not correlated to each other, and many of us recognize that shitcoins are dependant upon bitcoin for their performance, which means that they are correlated to bitcoin, even if many of the shitcoin proponents claim that shitcoins are not correlated to bitcoin.. They many times will claim that they are better than bitcoin, yet they are lying in their various talking points including their claims of the non-correlation between bitcoin and shitcoins.
So then anyone who invests into shitcoins for the purpose of diversifying should be asking themselves what are they getting by putting value into shitcoins, since they are correlated, that means that perhaps more volatility and more risk is added onto just investing into bitcoin.. and bitcoin does tend to out perform shitcoins, even though surely there can be short periods of times in which shitcoins will perform better than bitcoin.
I have been thinking about it but you just made it clear to me now because how would someone invest on something that still depend on something they have already (Bitcoin) it doesn't too make sense because even the shitcoins they are diversifying into doesn't even have one quarter of Bitcoin potential because when diversifying we should look for something that have great potential almost as that of Bitcoin. Yes there are period we see shitcoins doing well while Bitcoin will somehow be in constant state but we should know that this case or situation doesn't happen often ( once in a blue moon).
Diversification is generally thought to preserve wealth rather than to grow wealth.. so frequently shitcoiners even get the idea wrong, since they are tending to throw a bunch of money at a variety of shitcoins and hoping that one of them will pump enough or more than enough to make up for their losses in the other ones.
Sure concentration in risky assets can frequently be thought of as a means to grow wealth, including bitcoin can be considered in such a light, even though many of us have come to realize that bitcoin is not as risky as it is made out to be, even though it is quite volatile and even inevitably volatile, which also may well be a characteristic of a growing asset.
I would just like to mention also that there are so many of the traditional assets (the non bitcoin assets) that are quite heavily correlated to the dollars performance, which largely shows that the crazy levels of our current debt and even debt irresponsibility has contributed to perversion of the various markets, including actual asset inflation that is artificially pumped up by the dollar and subsequently folks wanting to get into assets rather than holding their value in the dollar since they know that the dollar does not hold its value.. which causes them even more to pump up the value of various assets, including that bitcoin can also have quite a few relations to dollar liquidity, even though at the same time bitcoin has some fundamental aspects that are not so much able to be manipulated and giving it more solid growth fundamentals related to both its scarcity and its being fairly early in its adoption cycle..
So with some of bitcoin's attributes, it does not hurt to overallocate to bitcoin, even with realizations that bitcoin is likely to continue to appreciate more than other assets, even if there may also be attempts to reign bitcoin in and to manipulate bitcoin in similar ways that other assets have historically been manipulated. Yet with bitcoin there remain some difficulties to manipulate it in terms of the ease in which it can be self-custodied, even while attacks of self-custody are underway.