Diversification refers to the risk-management strategy where an investment portfolio is spread across several assets. Diversification always takes place by dividing the funds across various large and small companies, as well as investing in different assets classes altogether such as stocks and bonds.
This way, in case any given sector takes a hit, the overall risk of losing money can be mitigated. The same principle of diversification is applicable in cryptocurrency. Instead of investing in a single coin, users can diversify their portfolios across different coins and tokens.
The other positive aspect of diversifying a portfolio is that traders are exposed to a variety of blockchain-based projects such as NFTs and crypto gamification. This way, they can mitigate their risks and invest in promising projects for the future.