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I don't think that "diversify" is used with the correct economic meaning, because to diversify you need independent assets, and cryptocurrencies are not. Let me
by ecesena 9y ago
I don't think that "diversify" is used with the correct economic meaning, because to diversify you need independent assets, and cryptocurrencies are not. Let me try to explain my thoughts.
To diversify you typically want to invest in assets that are independent and with a similar expected return. Only if they are independent you're really reducing your risk or, said in another way, the more independent they are, the more you're reducing your risk.
Cryptocurrencies are far from being independent, you can easily tell by charting them together, e.g. https://priceeth.github.io https://priceeth.github.io, so I don't think you're really reducing any risk.
- haggenballs 9y agoYeah exactly. Although there are some pairs that have low and negative covariances. Check out this: https://blog.enigma.co/markowitz-portfolio-optimization-for-cryptocurrencies-in-catalyst-b23c38652556 https://blog.enigma.co/markowitz-portfolio-optimization-for-...
- arcaster 9y agoAwesome to see great stuff like this coming from the Enigma team! Founders are a great group of talented ppl!
- ecesena 9y agoMmm... I'm not sure I'm reading this correctly, but it seems that these portfolios only win against BTC. So if you just invested in ETH, you'd have done much better. I guess what I'm saying is that you're not reducing risk by keeping the same expected return (well, unless you arbitrarily claim that all cryptocurrencies have the same expected return, for which there's no data evidence). You're just averaging your returns.