The DeFi Chronicle: 4 Crypto index investing ideas to make you money
Children. Gather around the fire because I want to tell you a story. There once was a time when people invested in the stock market and picked individual stocks. Their fortunes were decided by the fate of these stocks. Some grew incredibly wealthy by picking the right stocks at the right time. Others went belly up as their stocks nosedived into oblivion.
Of course, this was a reality before the explosion of the mutual fund/index fund/and ETF (exchange-traded fund). It required research, decision-making, fortitude, and some luck. Luckily, we don’t have to worry about the stress of picking stocks today with all of the indexing options at our disposal.
For anywhere from a zero to a large annual fee, we can invest in these equity pools to own a basket of stocks and protect our portfolios from wide gyrations occurring with individual equities. History has proven that index investing outperforms the average stock-picker. Don’t get me wrong. There are exceptions.
This begs the question: can we take an indexed approach to crypto? Perhaps more importantly, does it even make sense in crypto?
The case for diversification in crypto
As an asset class, crypto is still in its infancy. We use historical data to try to justify our arguments and hypotheses, but the space is just over a decade old. There were cryptos 10 years ago that seemed promising at the time that no longer exists today. Conversely, some coins were created as a joke (Dogecoin) and now command multi-billion dollar market capitalizations and copycat projects that have made some people ultrarich.
I’m a fan of diversifying. I have had all my crypto portfolio primarily in one or two investments and it has resulted in me making bad decisions. Having all of your eggs in one basket can be exhilarating and profitable or it can be tense and destructive. My preference is to have a farm with multiple crops.
Diversification, if done properly, should provide protection and also allow for market upside. The following are 4 ideas for indexing cryptos.
Index #1- Buy the ecosystem
With the growth of smart contract platforms, we are seeing new DeFi ecosystems experiencing…