Single-crypto ETFs are all the rage in the crypto market these days. The most popular of these, of course, are the spot ETFs that invest in only Bitcoin (BTC +0.15%). Collectively, these spot Bitcoin ETFs have pulled in more than $100 billion from investors.

But there’s just one problem here: Bitcoin is down nearly 20% for the year, and almost 45% from its all-time high of $126,000 in October. Going all in on Bitcoin doesn’t appear to be the optimal investment strategy right now. Shouldn’t prudent investors be seeking out exchange-traded funds that invest in a basket of diversified cryptocurrencies to provide more downside risk protection?

The merits of portfolio diversification

In theory, investing in a basket of cryptocurrencies…