The 80/20 rule, also known as the Pareto principle, states that roughly 80% of effects come from 20% of causes. In the world of cryptocurrency, this principle can be applied in a variety of ways to help investors make more informed decisions and potentially improve their returns. Here are a few examples of how the 80/20 rule can be applied in cryptocurrency:
- 80% of the total market capitalization of cryptocurrencies is held by 20% of the total number of coins. This means that a small number of coins, such as Bitcoin and Ethereum, hold a significant portion of the overall value of the crypto market. By focusing on these coins, investors may be able to capture a larger share of the market’s growth.
- 80% of the trading volume in cryptocurrency markets comes from 20% of the exchanges. By focusing on the most popular and reputable exchanges, investors may be able to access deeper liquidity and potentially get better prices for their trades.
- 80% of the returns in a cryptocurrency portfolio may come from 20% of the holdings. This means that a small number of investments may be responsible for the majority of an investor’s returns. By identifying and focusing on these investments, investors may be able to optimize their portfolio for maximum returns.
- 80% of the progress in the crypto industry comes from 20% of the startups. This means that a small number of startups are responsible for the majority of the growth and innovation in the crypto industry. By identifying and investing in these startups, investors may be able to capture a larger share of the industry’s growth potential.
It’s important to note that the 80/20 rule is not a hard and fast rule and it can be applied in different ways depending on the situation. It’s a guideline to help investors make better decisions, not a guaranteed formula for success. It’s also important to conduct due diligence and research before making any investment decisions.