Diversification
Spreading capital across many assets to reduce reliance on any single one.
Diversification is spreading capital across different, ideally weakly correlated assets, so that a poor result from one does not decide the fate of the whole. The degree of concentration is measured, among others, by the Herfindahl-Hirschman Index (HHI): the sum of the squared weights of all positions. An HHI near 1 means capital concentrated in few assets (weak diversification), while near 0 means broad dispersion. Importantly, true diversification depends not only on the NUMBER of positions but also on their CORRELATION. Ten altcoins strongly correlated with Bitcoin are still effectively one bet, as in a sell-off they fall together. In crypto, diversification is therefore often weaker than it looks. It is a concept describing risk structure, not a guarantee against loss or a recommendation for a specific portfolio mix.
In plain words
Don't put everything into one thing. But beware: ten coins that all follow BTC are still one bet. What counts is not the number of positions but whether they move differently.
Example
A portfolio with one 80% position and a few small ones has an HHI of ~0.65 (strong concentration). An even split across 8 weakly correlated assets gives an HHI of ~0.13, providing far broader risk dispersion.
Also known as: diversification, dywersyfikacja, HHI, Herfindahl, indeks Herfindahla, диверсифікація