Part 3/8:
The primary advantage of incorporating correlated cryptocurrencies into a DeFi portfolio is the potential for full market exposure while minimizing divergence loss. This concept is crucial for anyone navigating the highly volatile crypto market, where keeping losses to a minimum is essential for long-term investment success.
When comparing asset pairs, traditional views often emphasize the safety and stability of stablecoins. However, in several risk categories, pairing a cryptocurrency with another correlated digital asset often yields significantly higher returns. For example, the pair of Ethereum to wrapped Bitcoin presents a compelling opportunity due to their high correlation, which ensures that if one asset rises in value, the other typically follows suit.