that reasoning is flawed. altcoin and btc prices are highly correlated and altcoins more volatile. so while the aspect of portfolio diversification is correct, there is an opposite effect that is larger: altcoins are empirically some kind of lever on btc so your portfolio gets more volatile.
however, on the long term (1 year+) I agree and I am also diversified.
[quote=“hackstutz, post:2, topic:1207”]that reasoning is flawed. altcoin and btc prices are highly correlated and altcoins more volatile. so while the aspect of portfolio diversification is correct, there is an opposite effect that is larger: altcoins are empirically some kind of lever on btc so your portfolio gets more volatile.
however, on the long term (1 year+) I agree and I am also diversified.[/quote]
^+1
[quote=“hackstutz, post:2, topic:1207”]that reasoning is flawed. altcoin and btc prices are highly correlated and altcoins more volatile. so while the aspect of portfolio diversification is correct, there is an opposite effect that is larger: altcoins are empirically some kind of lever on btc so your portfolio gets more volatile.
however, on the long term (1 year+) I agree and I am also diversified.[/quote]
I am afraid your reasoning is flawed 
The high correlation just means that you get the same. If the correlation is 90% the for the next 10% happens what I explain. It doesn’t matter if it happens rarely cause there is no downside. Volatility of the altcoins itself is not very important because of the extra system variable that lets you lose more rarely.
[quote=“arisg, post:4, topic:1207”]I am afraid your reasoning is flawed
The high correlation just means that you get the same. If the correlation is 90% the for the next 10% happens what I explain. It doesn’t matter if it happens rarely cause there is no downside. Volatility of the altcoins itself is not very important because of the extra system variable that lets you lose more rarely.[/quote]
Depends on timeframe in that case. Leverage doesn’t change Sharpe ratio for fixed period of time for perfectly correlated things, but over multiple periods your expected return is lower for anything with non-zero volatility because your losses on a logarithmic scale go up.
But that’s besides the point, the correlations between these coins are high because they have extremely volatile prices, but you could argue the expected future values are very different considering for example how PPC is growing against BTC.
Altcoins are where the innovation is. BTC is the blue chip. Altcoinland gives you the NASDAQ.
When BTC/USD goes down we see ALT/BTC goes down, too. This makes one wonder if altcoins are worth having compared with BTC. I think the price movement is because there isn’t good liquidity of ALT/USD usually (except for LTC), so anyone who wants to exist alcoin to get USD must sell ALT and buy BTC first, pushing down ALT to BTC prices. But when such sell period is over the price of alcoins (in BTC) should recover and the trend of ALT/BTC continues. Note that for the same (lack of) liquidity reason anyone who wants to buy altcoins with fiat will have to buy altcoins with BTC, lifting up altcoin prices against BTC. So the price recovery of altcoins after a BTC/UDS crunch is not going back to peak prices, but somewhere in the middle.