Rob Wolff on market cycles and diversifying your portfolio

The ongoing bear market seems to have shaken the confidence of even the most optimistic crypto investors. However, many believe that weathering the storm is the only way to survive in the industry.

Rob Wolff, the host of a YouTube channel called Digital Asset News, is one of those people.

In an interview with Cryptonites‘ Alex Fazel, Wolff said that bear markets show everybody has the brain to invest in cryptocurrencies, but not everyone has the stomach for it. Those that have been through previous market cycles and survived the 2018 crash seem more ready to ride the current bearish wave and wait out better market conditions. The “crypto tourists,” as Wolff calls them, have all already left.

One way to survive a bear market is to diversify your portfolio. Wolff said that while he was a proponent of diversification, there are two ways of looking at it. He explained that diversifying your portfolio too much could reduce your chance of taking a lot of profits, as your investments are spread thin over a dozen or so protocols. However, diversifying can also help you profit in time, as you have a better chance of timing the top for a larger number of investments.

While he was careful not to offer any concrete financial advice, Wolff said that allocating between 1% to 2% of one’s crypto portfolio to “degenerate altcoins” could be a worthwhile bet. He said that spreading this small percentage of one’s investments over a dozen or so low-cap altcoins could lead to one of them becoming the asymmetrical bet that pulls the rest of your portfolio out of the red.

Nonetheless, he said that investing in cryptocurrencies is much harder than investing in traditional financial instruments like stocks. Evaluating stocks is easier than evaluating crypto projects, as both the technology and the projects utilizing it progress so fast that it’s impossible to predict where they will take the industry.

This is why investments should be flexible and change over time.

Wolff said that one of the biggest lessons he learned as an investor is that concrete price predictions are a plague on the industry, as the more you learn about the industry, the more you realize just how much you don’t know.

Although many optimistic investors that have gone deep down the rabbit hole might believe that this market cycle will be different, Wolff has just enough experience to know that it’s not true.

“It will never be different,” he told Fazel. “Everything goes down eventually.”

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