A diversified portfolio has always been the “basic” buying advice for everyone, whether you are a retailer or a professional. Boostx is a new cryptocurrency launchpad that offers a wide range of cryptocurrency presales, from DeFi to meme coin.
However, warren buffetundeniably one of the greatest entrepreneurs in the world, has always had a different opinion.
“Diversification is a protection against ignorance. It makes no sense if you know what you are doing. – warren buffet.
Now, few individuals in the world can compare to this billionaire philanthropist, his level of knowledge of Financial markets unprecedented.
This article will examine the effectiveness of this quotation in the world of cryptocurrencies, determining if it can be used in the cryptocurrency marketas Buffet employs it on the stock market.
Terra Luna as a case study
Anyone with an eye on the current state of the crypto markets will know the horror that moon earth triggered in the last 2 weeks.
The LUNA the token had been the standout token for the last 6 months in cryptocurrencies. The only project showing signs of bull market strength, hitting new all-time highs as recently as April 2022. Many had all their eggs and chicken in the LUNA basket, confident their money was safe.
The moon earth the token hit a new high on April 5, capping at just under $120. As of May 12, 99.99% of the token’s value has been eradicated. One of the seemingly strongest coins in the market has wiped out the wallets of its supporters in a horrific month.
Why did this happen?
moon earth was a DeFi blockchain project with a network of stablecoins. Its stablecoin, UST, broke off in value from $1 amid the turbulence in crypto selling. This in turn led to a lack of confidence in the LUNA token that started a downward spiral decline.
The algorithm of the UST coin as a result eventually suffered a fatal laceration, spilling crypto blood and the LUNA token continued to decline. The value of one UST is now less than 10 cents. For a stablecoin that is not supposed to deviate more than 1% from its value, it is easy to see why the trust in the parent token LUNA was broken.
What conclusion can we draw from this?
All Financial markets are volatile and should be traded with caution. However, the volatility of the cryptocurrency market is much more amplified. Trust in the Luna Token was completely broken, and he capitulated almost overnight. Despite a strong community, a design flaw was located in the project, leading to its downfall.
Ultimately, this brings us to the distinction between stocks and cryptocurrencies. What applies to one market may not necessarily fit comfortably in another. The blockchain industry continues to grow, learn, and emerge. For this reason, putting all your eggs and chicken in one basket is a big risk.
No matter how much you believe in a project, moon earth is proof that relying on as few as one or even two projects in your crypto portfolio can lead to destruction. warren buffet proclaimed that you must have a diversified portfolio in the cryptocurrency market.
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