I don't have much capital. so my strategy is usually short term, I buy bitcoins when they are down and sell when the price is not too high but safe. When there are signs of falling, I will transfer Bitcoin to USDT to keep my capital.
Small capital shouldn't stop you from actively managing money
Long-term capital growth is usually through small but stable and continuous compounding of returns.
Why you wouldn't use options for example (among other ways) instead of spending on transaction fees, spreads, etc. by changing
BTC<->USD?
It's more not pleasant to see a liquidated position rather than having a high amount value in future. BTC is for long term and everybody holding it is looking for the future value. Why they will swing trade using futures and perp while they can have a sure profit in the long run without any risk of being liquidated.
Applying the principle of pro trader to BTC holder is a bit questionable. Because the majority of BTC holders knows that Bitcoin is a phenomenal investment especially those who enter at a very low price.
You are absolutely correct about all points. I am preparing a long-read post about the topic you mention that with most (not all though) derivatives you can quickly get liquidated, but if common people would have a proper way to avoid that, while hedging the downside somehow, they might be engaging more actively in risk management. It's like with Picasso paintings - you might believe in it or might not, might believe in long-term value or not, but you probably gonna take a good care of it to make sure nothing deteriorates its value.
In crypto, everything is uncertain. And it depends on how we manage the assets that we have. I myself am still focused on being able to control my emotions and also do not easily believe all predictions especially those that don't make sense. I do day trading when the market is green. However, if it is red I choose the safe path with hold. And indeed, you will rarely see the market so you don't panic.
Predictions are always wrong. The efficient market hypothesis (EMH) dictates that any available information is already priced in the market prices, so if someone says "
BTC will go up / (down) by X due to Y" - it's already in the price when you open terminal to check it. And with chaos theory, it becomes worse that any second someone might say / do something new, and the price might change grammatically - and this wasn't priced in the market before as was not known, thus no prediction could foresee that. But yes, playing with emotions (especially of others) and finding market inefficiencies can be a good source for earnings.
I think the easiest way to manage bitcoin price risk is to answer the most easy questions about bitcoin investment, why do you hodl bitcoin? is it for long term (years to come) or to take profits for the short term (within 2 weeks to 3 months); This decision will help you to know that the best advantage is to buy bitcoin during the dip(limiting your risks) and then you sell when it experiences price hikes. BUT YOU HAVE TO BE CERTAIN WHAT YOU WANT with bitcoin to aid your decision making.
True, but you never know when is "the dip" comes.
Futures are not so innovative. People are hedging sugar, wheat, etc. from centuries.
https://en.wikipedia.org/wiki/Futures_exchangeMost of the time, I'm looking at crypto as crypto and not comparing the USD value. It's like buying a working van. Do you look for its current USD value daily?
When I need to hedge against USD anyway, I'm using Bitmex.
I know that futures are not innovative at all
That was my point that crypto-market virtually has nothing now for properly managing risks - futures, swaps, perpetuals, options, and... that's all?
As for the van - you still will be doing some maintenance, right? Otherwise it will be broken pretty soon.