Also known as the Pareto Principle, the 80/20 rule states that roughly 80% of results come from just 20% of efforts. This concept holds true in many areas of life and business, including crypto investing. When it comes to cryptocurrencies, the same principle applies. A small number of cryptocurrencies make up the majority of market capitalization and drive most of the profits for investors.
The Top NFT Brands Will Win
The Pareto Principle isn't meant to represent an exact ratio, but rather a general principle that can be applied to many situations. In the world of crypto investing, this means that a small number of coins and tokens will drive most of the profits for investors. The same concept applies to non-fungible tokens (NFTs) which have gained popularity in recent years.
Think about it - how many NFT brands can you name off the top of your head? Chances are, only a few come to mind. This is because just like cryptocurrencies, there are a select few NFT brands that dominate the market and capture the majority of attention and profits. As more companies and individuals enter the NFT space, this trend will likely continue.
Investors looking to capitalize on the growing interest in NFTs can use this principle to their advantage. By identifying and investing in the top NFT brands, there is a higher likelihood of seeing significant returns on investment.
Of course, this doesn't mean that smaller or lesser-known NFTs should be completely disregarded. These may still hold potential for growth and profits, but they may require more research and due diligence.
The 80/20 Principle Strategy For Risk-Adverse Investors
For investors who prefer to play it safe, the 80/20 principle can also be applied in a different way. These investors can allocate 80% of their investment portfolio to more stable and established cryptocurrencies or traditional assets, while dedicating 20% to riskier and potentially higher-yielding investments such as NFTs.
By diversifying their portfolio in this way, investors can minimize risk while still capitalizing on the potential profits of emerging markets like NFTs. This also allows for a balance between long-term stability and short-term gains.
Why 80/20 Thinking Matters For Founders
For founders and CEOs in the blockchain industry focusing on NFTs, the 80/20 principle can also provide valuable insights. By identifying and focusing on the 20% of efforts that bring in 80% of results, companies can optimize their resources and achieve maximum impact.
This is especially important in a fast-paced and highly competitive market like cryptocurrencies. By prioritizing the most impactful aspects of their business and constantly evaluating and adjusting their strategies, blockchain brands can stay ahead of the curve and continue to dominate in the industry.
Final Thoughts
Moonrig.io serves as an excellent free crypto portfolio tracker that can help investors easily apply this principle, while also providing valuable market insights for founders. With the right mindset and tools, individuals and companies can leverage the 80/20 principle to find success in the ever-evolving world of blockchain and NFTs.
FAQs
The 80/20 Principle Strategy For Risk-Adverse Investors
What is the 80-20 rule in investing? ›
In investing, the 80-20 rule generally holds that 20% of the holdings in a portfolio are responsible for 80% of the portfolio's growth. On the flip side, 20% of a portfolio's holdings could be responsible for 80% of its losses.
What is the 80/20 rule in simple terms? ›
The Pareto principle states that for many outcomes, roughly 80% of consequences come from 20% of causes. In other words, a small percentage of causes have an outsized effect.
What is the rule of 80 investing? ›
When building a portfolio, you could consider investing in 20% of the stocks in the S&P 500 that have contributed 80% of the market's returns. Or you might create an 80-20 allocation: 80% of investments could be lower risk index funds while 20% might could be growth funds.
What is the 80-20 rule for customer profitability? ›
The key to success is identifying the crucial 20% of input and prioritizing it. The 80/20 principle permeates business: 20% of customers, and 20% of products, generate 80% of revenue. My firm has seen this play out hundreds of times.
What is the 80-20 rule in trading? ›
In trading, this means that approximately 80% of returns are expected to come from 20% of trades or trading strategies.
What is the 80-20 rule real examples? ›
80% of the public uses 20% of their computers' features. 80% of crimes are committed by 20% of criminals. 80% of sales are from 20% of clients. 80% of project value is achieved with the first 20% of effort.
What does 80-20 rule look like? ›
The 80/20 rule is a guide for your everyday diet—eat nutritious foods 80 percent of the time and have a serving of your favorite treat with the other 20 percent. For the “80 percent” part of the plan, focus on drinking lots of water and eating nutritious foods that include: Whole grains.
What are the flaws of the 80-20 rule? ›
The 80–20 rule can lead to neglecting the root causes: The 80–20 rule can focus on the symptoms rather than the root causes of a problem. For example, assuming that 80% of customer complaints come from 20% of the product features may lead to neglecting the underlying issues that are causing dissatisfaction.
What is the 80/20 rule in dating? ›
“Let the other person make the first move 80 percent of the time and you initiate the other 20 percent. This is a good way to mentally give yourself a break—and they won't let you get away if they truly want things to work out.”
He famously observed that 80% of society's wealth was controlled by 20% of its population, a concept now known as the “Pareto Principle” or the “80-20 Rule”. The Pareto distribution is a power-law probability distribution, and has only two parameters to describe the distribution: α (“alpha”) and Xm.
What is an 80 20 investment portfolio? ›
This investment strategy seeks total return through exposure to a diversified portfolio of primarily equity, and to a lesser extent, Fixed Income asset classes with a target allocation of 80% equities and 20% Fixed Income. Target allocations can vary +/-5%.
What is the 80-20 rule of thumb? ›
The rule maintains that the ratio of positive production (outputs) to industrious effort (inputs) is roughly 80% to 20%. People might wish that all exertions produced success in an equal proportion, but in some cases, the 80-20 rule can be observed, and prioritizing those initial efforts can produce outsized results.
What is the 80-20 rule for saving money? ›
The 80/20 rule breaks out putting 20% of your income toward savings (paying yourself) and 80% toward everything else. Once you've adjusted to that 20% or a number you're comfortable with saving, set up automatic payments to ensure you stick to it.
Which concept suggests the 80-20 rule? ›
The rule suggests that roughly 80% of effects come from 20% of causes. This principle has found applications in various fields, offering valuable insights into productivity, resource allocation, and optimization.
Why is it called 80/20? ›
Vilfredo Pareto
In business, the 80/20 theory is a powerful tool. This theory is called Pareto's Law after Vilfredo Pareto (1843-1923), an Italian economist and sociologist who said that 80% of your results come from 20% of your efforts.
What is the 50 30 20 rule for investing? ›
The 50-30-20 rule recommends putting 50% of your money toward needs, 30% toward wants, and 20% toward savings. The savings category also includes money you will need to realize your future goals.
What is the 50 40 10 rule in investing? ›
The 50/40/10 rule budget is a simple way to budget that doesn't involve detailed budgeting categories. Instead, you spend 50% of your after-tax pay on needs, 40% on wants, and 10% on savings or paying off debt.
Is 80 20 portfolio a good investment? ›
The 80/20 rule only works when there are enough data points to accurately assess whether an investment will be successful or not. If you've never invested before and don't know how much risk you're willing to take when investing in stocks, or other asset types, then this strategy may not be suitable for you.
