Dan Bilzerian, the popular social media celebrity and professional poker player, has a diversified portfolio of cryptocurrencies, with funds evenly spread out amongst the most valuable digital currencies in the market.
“For everyone asking, i have 50% Bitcoin, 25% ETH, 15% Monero and 10% Bitcoin Cash,” said Bilzerian.
Merits of a Diversified Portfolio of Cryptocurrencies
As bitcoin and security expert Andreas Antonopoulos explained, it is favorable to maintain a diversified portfolio of cryptocurrencies rather than allocating all of the capital into a single digital asset for risk minimization.
“I own a few different crypto assets as part of a small but diversified portfolio. I only risk as much as I’m willing to lose,” said Antonopoulos.
Bilzerian is using a similar approach to that of Antonopoulos’ personal investment method, of investing in a wide range of cryptocurrencies with different use cases. For instance, bitcoin is widely acknowledged as a robust store of value, Ethereum as a network for decentralized applications, Monero as an anonymous cryptocurrency, and Bitcoin Cash as a digital cash system.
All four of the cryptocurrencies which Bilzerian has invested in have distinct but unique use cases. Cryptocurrencies like Monero, Zcash, and Dash are fundamentally different from bitcoin and Ethereum, as they provide privacy and anonymity to their users. Hence, the three privacy-focused cryptocurrencies serve an entirely different market than bitcoin, Ethereum, and Bitcoin Cash.
Invest a Percentage That is Equivalent to Your Understanding of how the Technology Works
Keeping a diversified portfolio of cryptocurrencies also allow investors to investigate into other cryptocurrencies apart from bitcoin, and develop a better understanding of the cryptocurrency market and the structure of other cryptocurrencies.
But, Antonopoulos previously noted that it is important for an investor to invest an amount that is proportional to the investor’s understanding of the technology. Antonopoulos said:
“What percentage of your wealth should be tied up in bitcoin? A percentage that is equivalent to your understanding of how the technology works and your ability to absorb the risks it entails, which for most people is a small percentage.”
In April, Bilzerian revealed that he had invested a “shitload” of money into bitcoin and the cryptocurrency market. Given that bitcoin still accounts for 50 percent of his portfolio and he has not sold much of the Bitcoin Cash that he was accredited to after the fork as he still owns 25 percent of his portfolio in Bitcoin Cash, Bilzerian likely has a solid understanding of bitcoin and is confident in the long-term growth trend of bitcoin.
The majority of investors in bitcoin and the cryptocurrency market are confident that cryptocurrencies such as bitcoin can replace existing banking systems and transform the global finance industry. The market valuation of bitcoin is currently at $143 billion. But, as mainstream adoption of bitcoin increases and tens of billions of institutional money flow into the market in the upcoming months, bitcoin will establish a strong foundation for an exponential long-term growth rate.