O’Leary, 67 and born in Canada, has made a career out of investing. But it’s not just his job, it’s his persona. He’s “Mr. Wonderful”. He’s a shark who invests in cupcake companies. He’s the guy who calls it as he sees it: Investments either win or lose. It’s that “binary.”

Yet, when it comes to crypto, O’Leary is an advocate for diversification. He says his largest holding today is ETH, the native currency of the Ethereum network, and he has also bought BTC, SOL, MATIC and 28 other coins. Likewise, seeing crypto exchanges as potentially lucrative, he sees a world where both decentralized and centralized exchanges can win.

Last week, his decentralized finance play, WonderFi, bought a regulated Canadian exchange in a cash and stock deal.

“In my world, I can go all the way to 20% in crypto, and within that subset no position will be larger than 5%,” he said. “That is a very sound mandate of diversification. You will get the rise of crypto. Not all will be equal. … I’m not going to get wrecked if one 5% position goes to zero.”

Although spread wide, O’Leary says these investments are not random. Drawing a comparison to Microsoft and Google, he views cryptocurrencies as “​​productivity software.” Bitcoin is not a coin, there’s no physical counterpart, it’s code, he said. Likewise for tools like Polygon, which is trying to bolster Ethereum’s lackluster throughput. He doesn’t “play” with meme coins, favoring “real productivity.”

“I don’t know which of these platforms is going to win. That’s why I own them all,” he said. “I’m investing in the long-term future of a global enterprise.”

Cryptocurrencies

O’Leary has been an advocate of cryptocurrency investing and personally owns coins in the cryptocurrencies Ether, Polygon, SOL, Bitcoin, and Pawthereum. In June 2021, he became a strategic investor in the Vancouver-based decentralized finance platform Defi Ventures; the company then renamed itself WonderFi Technologies, in reference to O’Leary’s nickname, “Mr. Wonderful”

Why O’Leary believes diversification will help you “win big”

Whether you’re investing in crypto or any other asset class, having a diversified portfolio means you won’t be knocked sideways if one particular investment doesn’t pan out. Moreover, as the seasoned investor points out in a recent social media post, “I don’t need them all to win, I just need a few of them to win! That’s what diversification is all about.”

He continues, “My strategy is to do the same thing I do with stocks, diversify.” There are a lot of parallels between cryptocurrency and the early days of the internet, which suggests that many projects will fail while a handful could go to the moon. It’s still very early days, making it difficult to know which coin or token will become the next Amazon or eBay.

With over 20,000 cryptocurrencies out there, investors still need to do their research. Look for cryptocurrencies with utility and strong leadership teams, and consider diversifying within a particular segment of crypto. For example, I am a big fan of smart contract cryptos because they are the framework on which many other crypto projects get built. Ethereum (ETH) is the biggest crypto in this segment, but it struggles with high gas fees and network congestion. So I own Ethereum as well as several Ethereum alternatives — it isn’t yet clear which one will come out ahead.

Building a diversified portfolio, Mr. Wonderful–style

To build a diversified portfolio, start by thinking about what percentage of your investments you want to dedicate to crypto. O’Leary began with 2.5% and steadily increased his exposure. Many financial experts suggest putting no more than 5% into crypto, while others stretch that figure to 10%. It all depends on your attitude to risk and the amount of time you’re willing to spend researching and understanding the crypto market.

O’Leary says the way sovereign wealth funds work is to put no more than 20% into a single sector (and he includes crypto as a sector) and no more than 5% into any specific stock or bond. He’s following that same model with crypto. Mr. Wonderful, who is the Chairman of O’Shares Investments, says he owns positions in 32 different coins and tokens.

He told a Bankless podcast a few months ago that his largest holdings are in Ethereum and Bitcoin, which mirrors the approach of a number of successful crypto investors. Combined, these two crypto giants account for almost 60% of the total crypto market cap, giving them more liquidity and a better chance of long-term survival. O’Leary also owns Polygon (MATIC), a layer 2 solution that’s focused on improving the performance of Ethereum. He is also a fan of Solana (SOL), a speedy smart contract crypto that shot to fame last year.

Diversification isn’t the only secret to crypto success

Diversification is an important skill for every investor. If you’re investing in a high-risk asset like crypto, controlling your exposure can help you manage the risks and reduce the impact of volatility. The last year has shown us how dramatically crypto prices can fall, and that even high-profile projects can collapse completely.

In addition to building a balanced portfolio, it’s also important to only invest money you can afford to lose. This is a relatively new and unregulated industry, and there’s a lot we don’t know about how it will evolve. O’Leary can afford to put 20% of his operating capital into crypto, but your financial situation may be different. Make sure you understand the risks, and consider following Mr Wonderful’s example of slowly layering into any crypto investments.

By only investing money you can afford to lose, researching each asset carefully, and ensuring crypto is part of a balanced investment portfolio, you’ll be well positioned to capitalize on any gains. Importantly, if the crypto market goes sideways, it won’t take your finances with it.