This strategy is used when it is necessary to increase the guarantees of profitability. Even if the store customers stop buying pencils, pens and markers, the demand for crayons will allow the store to make a profit.
In cryptocurrency, the same logic applies. Buying only one, even the most successful cryptocurrency, does not give the guarantees that the diversification of coins can provide. At least some of the purchased assets will continue to grow, so the investor will get their profit.
For effective diversification it is necessary to first analyze the coins of interest. It’s like buying any product in the store. The consumer is interested in the shelf life of the product, its ingredients, other qualities. If the shelf life of milk is short, then buying even all the available packages in the store will not increase the likelihood that the product can be used in a few days.
For proper diversification, you first need to know the shelf life of milk, and then buy two packages from different companies. Then the probability that at least one will not go bad is greatly increased.
In cryptocurrency, instead of shelf life and list of ingredients, one should look at the project infrastructure, the names of its developers. It’s good if they’ve earlier participated in other profitable projects.