Conviction Investing
By Menno — 13 years in crypto, 3 bear markets survived, zero paid promotions
Last updated: March 2026
Conviction investing means concentrating capital in a small number of high-confidence positions based on deep research, rather than diversifying broadly across many assets.
Conviction investing is the philosophy that superior returns come from a few well-researched positions where you have genuine insight, rather than spreading capital thinly across 30-50 assets. Warren Buffett famously called diversification "protection against ignorance" — conviction investing rejects broad diversification in favor of concentrated bets on your highest-conviction ideas.
In crypto, conviction investing has historically produced the largest returns — and the largest losses. Early Bitcoin believers who maintained 50-100% of their portfolio in BTC from 2010-2015 achieved generational returns. Conversely, investors with high conviction in Terra/LUNA, FTX's FTT token, or countless failed altcoins lost everything. The key word is "conviction based on research," not "conviction based on social media hype."
For most retail investors, pure conviction investing (1-5 positions) carries too much idiosyncratic risk. A middle path is a "barbell" approach: maintain a core 60-70% in high-conviction positions (Bitcoin, Ethereum) and treat the rest as a research-driven allocation of 3-5 altcoin bets where you've genuinely done the work — reading the whitepaper, understanding the tokenomics, tracking on-chain adoption metrics, and setting clear invalidation criteria. Conviction without criteria for being wrong is just overconfidence. Define what would make you exit each position before you enter it.
Frequently Asked Questions
How many positions should a conviction portfolio have?
Pure conviction investors hold 5-15 positions total. For crypto, a practical conviction portfolio might be 3-5 core positions (Bitcoin + 2-4 high-conviction altcoins) representing 80%+ of the portfolio, with the rest in stablecoins or diversified small positions. Quality of research matters more than the exact number.
How is conviction investing different from just being undiversified?
Conviction investing requires rigorous research and pre-defined invalidation criteria — specific conditions that would make you exit. Random concentration without research is just gambling. Conviction means knowing why you own something, what would prove you wrong, and being willing to act when that signal appears.
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Related Terms
Portfolio Concentration
Portfolio concentration refers to how much of your investment capital is allocated to a small number of assets, with higher concentration meaning greater exposure to individual asset performance.
Portfolio Allocation
Portfolio allocation is how you divide your total investment capital across different assets, sectors, or risk levels to balance growth potential against drawdown risk.
Position Sizing
Position sizing is the process of determining how much capital to allocate to a single trade or investment, balancing potential reward against the risk of loss.
Exit Strategy
An exit strategy is a predefined plan for when and how to sell your investments. It includes profit targets, stop losses, and rules for reducing positions — designed to remove emotion from selling decisions.
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