CGP Crypto Diversification Lens

Owning more cryptocurrencies does not automatically mean you have reduced your risk.

The CGP Crypto Diversification Lens lets you build a hypothetical crypto portfolio and compare its historical risk and upside directly against Bitcoin.

It answers two simple questions:

1. Did adding these coins actually reduce risk?

2. Did the additional risk produce more upside?

How to use it

1. Open any cryptocurrency on the 1D chart.

2. Add the coins you want to test.

3. Enter the percentage allocated to each coin.

4. Select your historical lookback.

5. Read the Downside Test, Upside Potential and Two-Sided Readout.

The weights are automatically normalized, so they do not need to add up to exactly 100%.

Downside Test

Volatility vs BTC

Shows how volatile the portfolio was compared with Bitcoin.

• Below 1.00×: Less volatile than BTC

• Around 1.00×: Similar to BTC

• Above 1.00×: More volatile than BTC

Maximum Drawdown

Compares the portfolio's largest historical decline with Bitcoin's largest decline over the same period.

A portfolio containing more coins can still experience a larger drawdown than Bitcoin.

Downside Capture

Measures how the portfolio performed specifically on days when Bitcoin was falling.

• Below 100%: The portfolio lost less than BTC

• Around 100%: The portfolio behaved similarly to BTC

• Above 100%: The portfolio lost more than BTC

Down-Day Correlation

Shows how closely the portfolio moved with Bitcoin during Bitcoin's negative days.

A high correlation means the assets continued moving together when diversification was supposed to provide protection.

Upside Potential

Upside Capture

Measures how the portfolio performed on days when Bitcoin was rising.

• Above 100%: The portfolio captured more upside than BTC

• Around 100%: BTC-like upside

• Below 100%: The portfolio captured less upside than BTC

BTC Beta

Shows how sensitive the portfolio was to Bitcoin's movements.

A beta above 1.00 means the portfolio historically moved more aggressively than Bitcoin. This can create additional upside, but also additional downside.

Capture Asymmetry

Compares upside capture with downside capture.

• Above 1.00×: More upside captured relative to downside

• Around 1.00×: Similar upside and downside participation

• Below 1.00×: Downside capture dominated

Two-Sided Readout

The indicator combines the results into a simple portfolio profile, such as:

• Risk Diversifier

• Lower-Risk Mix

• Better Asymmetry

• Higher-Beta Mix

• Upside Amplifier

• Risk Amplifier

• BTC-Like Mix

The chart underneath the table visualizes both sides:

• The gold line shows the portfolio's upside edge versus Bitcoin.

• The second line shows downside protection.

• Above zero means the portfolio lost less than BTC.

• Below zero means the portfolio amplified Bitcoin's downside.

When the portfolio captures more upside while also amplifying downside, the indicator highlights a Higher-Beta state.

What this indicator helps you understand

Diversification inside crypto can reduce the risk of one individual project failing. However, it does not automatically reduce the market risk shared by cryptocurrencies.

If Bitcoin falls and every asset in the portfolio falls even harder, owning more coins did not necessarily make the portfolio safer.

Use this indicator to test the actual historical effect of each coin before calling a portfolio diversified.

Methodology and limitations

The indicator creates a hypothetical fixed-weight portfolio using aligned daily returns. It assumes daily rebalancing and uses completed daily price data.

It does not include:

• Trading fees

• Slippage

• Taxes

• Liquidity constraints

• Rebalancing costs

• Token-specific fundamental risks

Results are historical and descriptive, not predictive. A favorable result does not guarantee similar future performance.

For educational and research purposes only. Not financial advice.