[Edited Out]
Not only traders falls into this problem of diversifying also Bitcoin holders like wise some other investors because they feel they are holding Bitcoin and so it is enough reason for them to diversify not knowing that their cash flow is not strong enough for diversifying, some do it because they see others doing it or wanting to answer the name of a lot of business owners without understanding that your present investment must be strong and firm financially and be able to withstand any huddles of you diversifying if being tempered to diversify and in return .
Remember when you diversify is to serve as a back up fund that you use to support and protect your existing business/investment as soon as they are grown not to make it grow
Like you said people that diversify are traders also a lot of people get into trading because they see people going into since to them it is less risky and profitable without them having full ideas or understanding trading and that is why they lose all their resources. Some persons have not finished managing or even having full idea of their holdings properly and they are talking about diversifying this is why businesses/investments crash.
Firstly, Bitcoin is not supposed to be any investors main source of income. To invest in bitcoin, one must have a stable source of income where he earns, monthly, weekly or even daily. This allows someone to be sure of the next moment. To diversify your income is the reason for investing in bitcoin. So if anyone is seeing investing in shitcoins as diversification, then he or she does not understand what he is doing or greed is taking over him. Bitcoin is a stable coin which has survived years of tests. Anyone investing in altcoins and shitcoins is already a trader because shitcoins cannot be hold for long to avoid loosing all your money.
Remember when you diversify is to serve as a back up fund that you use to support and protect your existing business
Backup funds and emergency funds are not invested. So there's no point claiming you are diversifying your money by investing your backup funds or emergency funds in shitcoins which has a very high risk of loosing entire money. If anything happens to the back up funds there, your bitcoin would be vulnerable and you can either panic sell or possibly sell at loss in order to sort other life threatening circumstances. Shitcoins is not an option, leave your backup funds in a very accessible place where you can have make use of it anytime the need arises in order to hold your bitcoin for a long period of time.