Digital Asset Diversification Strategies and Understanding Risk

On a recent Nasdaq TradeTalks, Jill Malandrino hosted a panel discussion on “Digital Asset Diversification Strategies and Understanding Risk.” The conversation brought together leaders from across the industry to discuss how institutions are approaching portfolio construction and risk management in the digital-asset space.:

• Zav Witdouck, Engineering Director at Talos‍
• CK Zheng, Founder of ZX Squared Capital‍
• Stephen Richardson, Chief Strategy Officer and Head of Banking at Fireblocks

Watch the broadcast.

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Key takeaways

Demand beyond Bitcoin and Ethereum

Institutional adoption is moving quickly past single-asset exposure.

• Bitcoin and Ethereum ETFs showed there’s strong demand for digital asset access.
• Institutions now want diversified products, such as smart-beta indices and actively managed funds.

“A natural next step is broader, more diversified exposure—whether through smart-beta indices or actively managed strategies.” – Zav

Applying TradFi techniques to crypto

Traditional portfolio tools can work in digital assets, but they need to be adapted.

• Zav explained that Talos has analyzed portfolios of the top 10 digital assets using Monte Carlo simulations.
• Results show diversification reduces overall risk compared to single-asset strategies.
• Risk management must adjust for crypto’s “fat tails” and high volatility.

“Crypto returns have fat tails and very high, variable volatility.” – Zav

Liquidity and concentration risks

Even within the top 10 coins, liquidity is thin compared with BTC and ETH.

• Allocating large positions in altcoins can move the market.
• Institutions must manage liquidity and concentration risk carefully.

“Large funds cannot allocate significant capital to smaller coins without moving the market.” – Zav

How Talos supports institutional adoption

The panel highlighted that long-term adoption depends on robust infrastructure. Talos is built to provide:

• Portfolio construction and optimization
• Smart order routing across fragmented liquidity
• Risk analytics and exposure management
• Secure and efficient post-trade settlement

By integrating these functions in a single platform, Talos enables institutions to apply disciplined portfolio management to a rapidly evolving asset class.