Buy cryptocurrencies with different use cases.
One way to diversify your crypto holdings is by investing in cryptos with different use cases, or purposes. Cryptocurrencies are used as a medium of exchange, but they are not limited to transactions in exchange for goods and services. Bitcoin, for example, can also be used as a store of value, or a means to preserve and grow wealth, since it has produced outsize returns for investors. Another option, Ethereum, the second-largest crypto network on the market, has smart-contract functionality that allows the creation of digital programs, so this is an investment in a blockchain network where decentralized applications, or dApps, can be built. Crypto investors can also allocate some of their portfolio to stablecoins, which have a value that is pegged to an underlying asset, such as fiat currency. The consistent value of stablecoins, such as Tether (USDT) and USD Coin (USDC), helps temper the crypto market’s volatility.