Diversification means spreading your money across different assets instead of putting it all in one place. If one asset falls in value, it matters less when the others hold their value. The old advice not to put all your eggs in one basket sums it up.
How does diversification work?
Diversification works best when the assets don't all move the same way. Money might, for example, be spread across bank deposits, Shares, BondsBondsA loan from the buyer to the issuer, such as a government or company, which promises to pay interest and repay the principal at maturity. and property.
Here is an example. You have ISK 1,000,000. If it is all in one coin that falls by 60%, you are left with ISK 400,000. If only 10% is in that coin and the rest is in a bank account, you still have ISK 940,000 after the same fall.
Diversification and crypto
Many people think owning lots of different coins is diversification. It helps less than you might expect. Most coins follow the price of bitcoin closely, so when bitcoin falls, most altcoinsAltcoinA catch-all term for every cryptocurrency other than bitcoin, short for "alternative coin". fall too, often further.
Because of crypto's high VolatilityVolatilityHow much and how quickly the price of an asset moves up and down., diversification is more about how much of your savings is in crypto than about how many coins you own. Some people hold a small amount of bitcoin precisely for diversification, because its price has at times moved independently of shares and bonds. Spreading your purchases over time, with dollar-cost averagingDollar-cost averaging (DCA)Buying the same amount at regular intervals, for example monthly, instead of investing everything at once., is another way to reduce the risk of bad timing.
Everything in Myntkaup Learn is written and regularly reviewed by the Myntkaup editorial team. It is for education and is not investment advice. Editorial policy. Updated 18 October 2026.