Topic: How do you manage Bitcoin price risk? (Read 787 times)

You are right, but what about derivatives? For example by holding a portfolio of options+spot BTC, or futures/swaps+spot BTC, or even better - holding only tranched value securities, you can by yourself decide what amount of price risk to take, and whether it's upside risk or downside risk, or market-neutral risk. From my experience and to my knowledge, people who use financial derivatives can really fine-tune expected returns and without any hassle watch the price to drop or increase - they are in profit anyways, or at least don't lose anything.




Very true - many inexperienced traders ignore SL&TP features and just blow their accounts very quickly for no reason.

Bitcoin is risky, it is also very volatile, this also goes for all the other crypto currencies as well. You have to just learn to live with that and there isn't much you can do. Even if you do everything in your power and drop the risk as low as possible, it is still riskier than most other things. Which is why I think it is quite important for you to realize crypto will always be risky and get involved fully aware of that.

I am not saying people can go 100x leverage their positions and hope for the best, that would be riskier than normal, but even with DCA and buying periodically to drop the risk, you are going to still have big pumps and big crashes here and there, a DCA during 2018 would still be a loss, but would be a huge win right now. So basically you have to just drop the risk to regular standards and just wait for the price to go up.

Great point. As to my knowledge that's how our CEO was able to buy BTC @ $1.6k and later in 2018 sell it @ around $19.5-19.8k. Without monitoring it could end at $10k already (nearly 10x return which is very good), but it didn't. And as you correctly noted, the investment managers nowadays are not that useful but super overpriced.




What you refer to is about investment horizon as well, which is dependent and relates to the investment strategy. Once could invest in BTC @ $10, and just hold until today... imagine how much they would earn but that's more from investment side I assume, rather than trading as it is. But my personal opinion (in line with EMH) is that by looking at charts won't give any advantage at all - you look at the same thing with everyone, and there are way smarter people who interpret what others think by looking at charts. And the smartest ones go even further by considering what others think what others think by looking at charts. But just looking and analyzing data/charts which is known literally to everyone in the world won't typically yield in sustainable alpha over long-periods of time.




True, besides as you might have seen some charts posted around that "smart money isn't that smart anymore" - professional IMs fail to outperform retail investors in 2020, which might be their beginning of an end.

For me it is not about holding, it is about understanding the charts. What if you do holding but the trend is against your bias then for sure you will incur huge losses. Remember that there are right time to do holding and it is only applicable when the market is trending. In order to manage the risk very well, you should have edge or what they called niche. The edge is all about mastery of a specific strategy for example you are a swing trader; do not force your self to do scalping or momentum trading. You should use the strategy that is suitable to you in order for you to have good risk management.

Totally agree. That's why one of my personal rules when trading is to be patient not just when waiting for the value to rise but also when waiting for it to plummet and exhaust. If you want to earn money through trading, you have to take the time to monitor the changes. You can't just keep holding without checking the charts regularly, especially if it's already nearing the exhaustion point. Otherwise, you might as well just hire an investment manager, which will cost you a lot of money.

I believe you made a really great point! But that can be a totally different topic for discussion. That concerns more monetary vs. fiscal policies in relation to overall economy vs. targeted stimulus. For example in USA, yes, they just handle free money to everyone and did achieve a minor economic stimulus, but in China they didn't do that (even though Chinese economy was also not in the best shape after COVID-19 lockdowns early in the year), but instead what they did - they did very targeted stimulus. For example: entertainment industry (like theatres, cinemas, etc.)? - let it go bankrupt if it has to and cannot survive on its own - not a big deal; SMEs, BioTech, new Tech, and e-commerce? - support them and give super cheap loans, and all kinds of subsidies (especially to BioTech and MedTech - it's super crazy now here about this). Was that a good or bad decision in short-term? - As we see already it was a good one. Was it a good or bad decision in long-term? - We need to wait and see.

But speaking about the option of debt repayment for people I see both the good side and bad side about that though. The good side is as you mentioned - people get a huge relief and can have normal life. The bad side - 1) people will not learn from their mistakes, so once you pay off their current debt, they will get new ones, and history will repeat, 2) I as an average American, might not have issues about my debt (no matter how big it is), and would rather get free money and invest in US stocks or Bitcoin (best option ), if I am intelligent enough, and I could pay off even greater part of my own debt. And of course from conspirologist side - I would want to keep people indebted (modern slavery), would know that I get this money back anyways (since most people just go to waste that money by buying useless things), and add some dopamine to their minds so they will spend even more than what they received. So from that perspective, just handing free money is not the best, or nicest option, but it's the most optimal for society and for the ones above (I think, but my decision is by no mean is the final or the most correct one).

People will always want free money, that is in their nature, and I understand in some situations but you have to find the difference between the silly one and reasonable one.

For example, USA government is giving away money to people, that sort of makes sense, I think instead of giving money they should have actually do it reverse and pay everyone's debt, that would have been a lot better, and that way you would have to talk with less people, just the ones that are owed and you would pay more money in logic because people have a lot of debt, but you would at least get a discount compared to individuals who would do it one by one. Pay their rents, pay their bills, pay their mortgages, basically pay all the debt they have, when someone has zero debt, even if you do not give them any money at all, they would probably survive. But if you give them money, they would not be even capable of paying their debt fully and would still be at zero.

May I know please for how long you have been trading like that, and how much you earned net of spreads, trading fees, inflation, etc.? And even better if you could share Sharpe Ratio, Beta, Treynor, alpha, stdev, max drawdown, return range, median, etc. - then we could see how profitable that actually was

Really happy to see such people! That indeed shows that there are some people left on this planet who are not crazy greedy and try to rip off everyone around. I guess this gives a hope that at least some of the Community Members are indeed good people, as opposed to the "get rich and cheat everyone around"-to the core in traditional finance and currently DeFi/ex-ICO.

Same goes for me on where majority of people i've known do really ask me out about crypto or bitcoin generally on how i do make easy money with it without even thinking
that these things do came from all hard work.

I did rather give them some site on telling the basics and pointing out that this isnt an easy money scheme that you can get rich overnight.

Im always reminding them about the risk of losing money instead on making some gains.Managing risk is important because if you dont consider this then
expect for unfortunate things to happen.

You indeed are doing a great job in educating people and clearly explaining to them what it actually is! Unfortunately not so many people are same with you, and would just blindly recommend to "buy all in" or to sell house and buy as much BTC as they can... Bitcoin is indeed an alternative asset for now and thus carries a great deal of risks, and consequentially great potential returns. Thus the one who cannot handle such risks will get killed quickly.

And even for support & resistance levels & tech analysis... Don't you guys think that too many people know about it now? And as more people know about a particular strategy or method - the less useful it becomes (see "Efficient Market Hypothesis") - you cannot outperform market if you do the same things with the rest of people...

Telling buy low, sell high, support, and resistance strategy is really simple and easy to say, but if you will dive deeper, things are complicated.
We are talking about risk here, I believe every trader or investor may practice risk management, it is one of MUST strategy that trader needs.
Managing the Bitcoin price risk is difficult, that's why a lot of my family and friends already asking about Bitcoin to me and they are always telling me about "easy money", I always educating them that they should first know the risk, especially in crypto market.

Not only in support and resistance thing but also in other technicals a well which you can really use on making up your analysis.There's no such thing about 100%
but as long you do make profits then that what matter most.When it comes on managing risk then this would vary on each traders ways on how they do handle it out.
There are various ways thought but it will be a situational kind of action so its up to someone on how he deal with it.

to manage bitcoin price risk? of course by using a support and resistance strategy,
without this strategy I was very blind, and I succeeded, even though not 100%,
it's just that it makes it easier to handle risks in bitcoin volatility.

A lot - yes, but still not the majority as can be seen from the comments in other threads. Furthermore, that's the case only in tech-advanced communities, but if you go to rural area of China, or very north of Russia, or to some jungle in Africa - nobody wants to get even 100 BTC for free. Just useless there But you offer them USD and you will see a different reaction.

How would you hedge the risks? That's the main question I was trying to get opinions about from the community members.




But simpler - doesn't imply better, right? And no need to find really more profitable ways, there could be more stable or sustainable ways. And as you said - there can be more profitable ways too. You are correct that you shouldn't give up on something that is already working just for a minor improvement of returns, yet, as financial markets are dynamic and continually change, same is required from risk management and investment strategy - it should be evolving and always changing depending on market state and changes, otherwise there's a risk that when everyone start using the same method - it stops working (called - alpha decay, - the more people know about a "good strategy" - the more other people use it, and the worse it becomes).

DCA is simpler than all other options, you could find a "more profitable" method if you want to, but there is no method that is more profitable and also easier at the same time, DCA provides people with both very easy ways to make money but also profits them almost all the time as well. You could always suggest people something much better according to what you think, however that may not be as great for other people who try it out.

I personally used DCA for years now and I can honestly tell you that I can't even imagine changing my strategy, I love it very much. When you find something you love this much in trading world, it is a very rare feeling and you should never let it go. Just for the hopes of a bit more profit, you should not destroy all you worked for.

Well, it depends on who you are talking to about it because a lot of members here in the forum would prefer BTC instead of USDT but the majority of the new players in the market are aiming to have a higher USDT value and not looking at how much BTC that they have. I think that could also count as a price risk to BTC and how you manage it. Hedging your assets could be ideal.

You touched upon a great point "most of the people want to profit on a USDT basis and not BTC" (my point not relevant here, but we had a nice discussion with the Community about if Bitcoin is for Fake Rich, and you just gave an additional prove to that ).

Yes arbitrage is great in fact, as by definition it's "risk-free return", but usually it turns out to be practically not possible to implement, or the profit is so small that it becomes pointless. But yes, you had great points!

And actually about arbitrage trading we will have one innovative financial product for that in 2021, which nobody ever had (not self-promotion).

That is the advantage of cryptocurrency markets, and that's why I love it even though I have been down so many times with it. That's just the process of becoming an efficient trader and, hopefully, a profitable one. Anyways, once you have paired it with USDT in an exchange, you would get great volumes on it because most of the people want to profit on a USDT basis and not BTC. I'm currently not doing arbitrage at the moment, but the market maker is definitely a great strategy. 

Thank you very much for your kind comment! We really appreciate that. However, self-promotion is not the only point of current discussions, but rather we really do aim to find out how users in general manage their risks, succeed in the market, what they wish to have available, etc. Because whatever you personally, and anyone from our users wish to have, but doesn't have - we will make sure you will have that available on as.exchange.

And speaking for DCA, yes, as I noted, it is definitely helpful overall, however it won't make a person having great returns overall, nor it will save trader from significant or prolonged price declines. For example if you enter @ 18k, 19k, 20k, 21k, 22k, and then price declines to 4k, 4.5k, etc. The returns can be super negative, and if you used futures or margin account - it will get the entire balance liquidated.

By the way, please note that as far as to this point, we never posted our link, nor we even mentioned the alternative way of price risk management, which we do believe we have, but we don't want to disturb people with those types of "ugly marketing" which you referred too.




Yes, correct, but nobody can ever know when the pump will happen or next dump... Even Ray Dalio who recently finally accepted that Bitcoin could be a good alternative to gold. And even current $24k could be all time low price if you count from this very moment and afterwards price never returns to such levels. Then you could be discussing with your grandkids that you saw price of Bitcoin as low as $24 or you could be discussing that the price was ATH @ $24k and then dropped to $1k and never went up again... nobody knows.




You are reffering here to one strategy used by some of our friends. They indeed made a fortune on such "safe" bets by leveraging a lot and acting on minor market corrections withing the major trend. But still, you don't know if that was a market correction or trend change.