How can encryption investment achieve risk diversification? Essential secrets for cryptocurrency investors to ensure profit without loss.

In the highly volatile Crypto Assets market, investors often face a dilemma: how to drop risks without sacrificing potential returns? The answer lies in the classic investment principle of diversifying risks.

In simple terms, diversification of risk means allocating funds across multiple assets, where the correlation of returns among these assets is relatively low, in order to achieve the goal of risk diversification. This approach can both drop risk and not compromise returns.

Why Diversifying Risk is Crucial for Crypto Investors

In investment theory, “risk” can be interpreted as the possibility of the difference between actual returns and expected returns, which certainly includes the possibility of the principal suffering losses. This is especially true in the Crypto Assets market, where its Fluctuation is far higher than that of traditional financial markets.

Every investment tool involves different levels of risk, which can be divided into market risk and non-market risk. Market risk refers to risks that can affect the overall market, such as changes in interest rates, tax cuts, or economic recession.

In the crypto market, such risks include changes in regulatory policies, macroeconomic environment, global liquidity, etc.

Non-market risk refers to the unique risks associated with individual investment projects. In the crypto field, this may involve issues with a specific project's team, technical vulnerabilities, hacking attacks, or insufficient liquidity.

Market risk is something that investors cannot avoid, which explains why a fundamentally strong token may also decline when the overall market is in a downturn. Non-market risk refers to risks specific to individual investment projects, and investors can achieve the goal of reducing non-market risk through diversification.

The decentralized risk opportunities revealed by the token data of Gate Exchange on November 26

According to CoinMarketCap data, on November 26, 2025, the Crypto Assets market showed a widespread upward trend, with multiple tokens reaching recent price highs. The following are the top five tokens by increase on that day:

• MON (Monad): Current Price: $0.46 | Change: +44.78% | Market Cap: $508,314,406
• IP (Story): Current Price: $2.99 | Change: +22.72% | Market Cap: $992,477,737
• SPX (SPX6900): Current Price: $0.64 | Change: +13.36% | Market Cap: $597,223,959
• QNT (Quant): Current Price: $88.90 | Change: +12.41% | Market Cap: $1,073,288,776
• KAS (Kaspa): Current Price: $0.507 | Change: +12.29% | Market Cap: $1,367,983,459

Meanwhile, other tokens such as $GAS have a price of $2.190000, a market cap of $142.25M, DGRAM has a price of $0.005961, with a fluctuation of +6.83%.

The recent increase is mainly concentrated in emerging public chains and infrastructure projects, reflecting the market's focus on technological innovation. For investors diversifying their risks, this rotation phenomenon among different sectors illustrates the importance of diversified investment – one will not miss the entire market opportunity simply by missing out on a specific sector.

Specific Strategies for Practicing Risk Diversification in Crypto Investment

asset class diversification

Diversify investments across different types of Crypto Assets:

• Mainstream Crypto Assets: such as Bitcoin, Ethereum
• Emerging public chains: such as Monad, Kaspa
• Infrastructure projects: such as Quant
• Popular concept coin: such as SPX6900
• Utility token: such as GAS

allocation of assets with different market capitalizations

• Market Assets (Top 10 by Market Cap): Relatively stable, with small Fluctuation
• Mid-cap assets (market value ranked 11-50): balancing growth and risk
• Small-cap assets (market value over 50): high risk high return

cross-market and cross-domain investment

To further diversify investments, funds can be spread across different markets, where the fluctuations do not occur at the same time.

In the field of Crypto Assets, this can be understood as:

• Diversification across different tracks: DeFi, GameFi, NFT, Layer2, Metaverse, etc.
• Decentralization of different ecosystems: Ethereum ecosystem, Polkadot ecosystem, Cosmos ecosystem, etc.
• Decentralization in different geographic regions: Crypto projects under different regulatory environments in various countries

Common Misunderstandings and Correct Practices for Diversifying Risk

Misconception 1: Insufficient Diversification

Many investors believe that holding 10 different tokens diversifies risk, but if these tokens all belong to the same sector (such as all being DeFi tokens), then the risk has not been effectively diversified. True risk diversification is achieved by creating a portfolio with low correlation coefficients.

Misunderstanding 2: Over-Diversification

Some investors hold hundreds of tokens, which can lead to distraction and make it difficult to thoroughly research each project. Markowitz's portfolio management theory posits that as long as the correlation coefficient of the returns of two assets is not 1 (i.e., perfectly positively correlated), diversifying investments in two assets has the effect of drop risk.

For a portfolio composed of multiple independent assets, as long as the number of assets is sufficiently large, its unsystematic risk can be completely eliminated through this diversified investment.

Correct Practice: Core-Satellite Strategy

• Core Assets (70-80%): Allocated to relatively stable and long-term valuable mainstream assets
• Satellite Assets (20-30%): Allocated to higher risk but potentially higher return emerging projects

Diversifying risk is not a panacea, but it is necessary.

It is important to note that diversification can only drop risks and cannot completely eliminate them. Especially during a widespread decline in the crypto market, the correlation between different assets may temporarily increase, leading to a weakening of the effects of risk diversification in the short term.

However, from a long-term perspective, diversifying risks is beneficial for portfolio returns and/or increasing expected returns. For investors who concentrate their investments in a single asset, once that asset encounters problems, the losses can be devastating.

By diversifying investments, “if the funds are evenly distributed across 50 stocks, even if one company unfortunately goes bankrupt, the loss will only account for 2% of the total investment.” This principle applies equally to Crypto Assets investment.

Conclusion

Diversifying risk is an essential risk management tool for crypto investors. With the support of a diversified asset platform like Gate.io, investors can more easily build a diversified investment portfolio.

The recent price increase on the Gate exchange has concentrated on the market performance of emerging public chains and infrastructure projects, perfectly illustrating the rotation among different sectors. Investors should closely monitor the subsequent developments and ecosystem construction of these projects, while also establishing their own diversified investment strategies to maintain stability in the highly fluctuating crypto market.

Remember the essence of diversifying risk: it is not about maximizing returns, but about avoiding the concentration of risk. Under this principle, investors can enjoy the high potential returns of the Crypto Assets market while effectively controlling the overall risk level of their investment portfolio.