Topic: How do you manage Bitcoin price risk? - page 4. (Read 845 times)

I personally prefer to hold actual bitcoins than to access it using a third-party service. Bitcoin is a decentralized peer-to-peer currency which gives holders autonomy and pseudo anonymity, all of these intrinsic qualities are lost when one chooses to use the services of a centralized platform, the likes of which offer such investment options. I'm also interested in the usage of Bitcoin to pay for services.

For the most part, I agree with other points you made on this reply.

You shouldn't use a situation that would put global security at risk. Quantum computers would not be peculiar to Bitcoin and would potentially expose lots of sensitive information.
About shitcoins declining; that would actually be good for the market. A lot of coins over the years have fizzled out or their devs did an exit scam and a lot more in the future would follow suit, just the same way we have seen the top 10 coins by market cap (or at least 9 of them) switch places as some fell out of that range.

P.S, Writing consecutive replies is against forum rules. You should rather edit (merge) your new reply into the old one

I wouldn't agree that decline to $500 is impossible. Of course it's by no mean market prediction (I personally don't think we will see $500 in long-term), but it is well possible. Once our grandchildren (or earlier?) get quantum computers at their homes the same way we have PCs and phones now, where would be BTC? But under normal conditions, for sure - it won't go to $500 so easily (20x decline)... That's for BTC, but are you that sure about sh*tcoints with <$5-10 cap?

Besides, your definition of "buying dip" will vary from investor to investor. For someone who was born just today, BTC @ $50,000-100,000 can well be "buying the dip", and eventually, if all the optimistic predictions about BTC come true - recent $19.5-20k was also "buying in a dip". We can see what was the bubble and what wasn't only in retrospective after bubble bursts, and until then it's usually just another high-growth asset.

Actually investment horizon of 1-3 years is normally pretty short, as traditionally in investments long-term is like 20-50 years. And 1-3 years is a decent amount of time to destroy all your wealth. Like imagine you bout @ $1k in Dec-2013, and have 3 years left (for whatever reasons - retirement, urgent large expense, some problem, etc.), and if you hold for 1y, you get to sell @ $300, and if 3y - @ $900, so that's -10% market price, plus inflation, plus FX rates, plus opportunity costs, plus etc., etc., and it turnes out to be greater than -10%.


I'm not insider of Binance, or those, but I'm pretty sure as they have US$ expenses / US$-denominated expenses (salary, rent, tax, marketing), while they might be paying in BTC for some part, most of it, especially for shareholders, they would rather keep US$. For example, if you are regulated Sequoia Capital, you cannot accept your share in crypto-exchange to fluctuate that much, nor you can accept BTC-dividends. Therefore, I believe they might be heavily engaged in hedging operations with derivatives.


Could you elaborate on that please, why you wouldn't if it gives you same exposure, you know the contract / security is stored safely and you can lose it only in the same way you would lose actual BTC (phishing, hack, scam, etc.). Then why not to hold what can give greater % with same privileges?

The HODL thing works simply because what you described here is impossible. If your $1k goes to $10k it can come back down to $5k but not $500. The other scenario is when your $9k goes to $10k then comes down to $5k which only depends on your entry point.
People always miss the fact that noone who has ever bought bitcoin in a dip lost any money. Those who lose money are the ones buying the top (specially in bubbles) and have to face the bubble burst (like buying at $20k in 2017 and face the 2 year long bear market).

If you are a mid-to-long term holder with a span of 1-3 years, you also would not need to be worried about such intermittent price changes caused by such news. The market effect of the plustoken scam was short lasting and the market quickly rebounded and regained its value. The Bitcoin market is a muti-billion dollar one, and would be able to resist a bit of negative news. There are few events that would be able to have a long term effect on the price of Bitcoin and they are unlikely to happen.

Any company holding their assets in Bitcoin would trust the fundamentals of it. They recognize the volatility and also the ability of it to increase significantly in value overtime which it has done. A quick look at companies holding Bitcoin would show virtually all of them are up in their investments, it makes it much easier to manage the volatility.

About trading, I do not know much about it and would need to research more on form efficiency.

Quite frankly, I do not know if I would consider myself a long term holder; I said, I simply hold and ignore price fluctuations.
But I would much rather hold actual bitcoins than options, futures, bonds or any other stuff that lets you access it.

Thanks for the reference to the treads, will definitely check them out!

While you are absolutely right that BTC and crypto-market has been stabilizing recently, but still it's volatility when just recently it was @$4.8k and now nearly @$20k - that's 4.8x ROI. Most of the professional hedge funds with multi-billion AUM can just dream about that in such period of time Yet, there's no guarantee that tomorrow some new fake news won't break the streets (like the last one that Chinese gov seized assets of PlusToken scam, while actually those BTC were already sold before the announcement) and BTC won't crash again. If you are true long-term HODLer - no problem for you, but if you are a common person with short investment horizon like 1-2 max 3 years, you are unlikely to be happy about such swings. If you are a mid-/large-company dealing in BTC - you won't be happy either to see sharp changes of your assets; if you are long-only fund - also; if you are large exchange like Binance, Huobi, Coinbase, etc. - having your profits and assets fluctuating by 4-5x times within a year isn't a pleasant experience too.

As for trading... well, that's a separate topic for discussion I guess. In short-term you might earn something or hedge something, but eventually, you won't be able to beat the market. Because the the crypto-market is already in semi-strong form efficiency (Market Efficiency) (yes, some small coins might be experiencing weak-form efficiency), so theoretically you won't earn sustainably > than market. And if you are a common person - your success chances are even less.

As for DeFi... - completely agree with you. Most of the current ones, especially some popular derivative DeFis / DEXs are launched by kids who know nothing about derivatives, about running a business, nor about tech security. That's why trading volumes start to decline recently, as people get more educated about those flaws.

But for you, as long-term hodler, why wouldn't you for example buy ultra-long-term call options and just keep them?

Bitcoin market is volatile, but not nearly as this description paints it to be as we have been getting progress more stable with time.
I am part of those who simply hodl and ignore market swings as I consider that to be the option with the least risk in consideration of the fundamentals of the network.
To manage price risks; You could try swing or scalp trading or any of the other investment options available, but you should understand that they all come with their own level of risk in relation to the market, some higher than others.

If you're looking to understand more about how the futures and options market works in relation to Bitcoin, check out these threads;
Everything you wanted to know about BTC futures but were afraid to ask!
Everything you wanted to know about BTC options but were afraid to ask!

Bitcoin is not a product which was meant to add innovations into centralized investment ventures, so it is not surprising that there are limited options in that regard. Bitcoin itself is the innovation.
If you are looking for innovative offers, you can research on the DeFi market, although I would advice you do not waste your time with that.

This post may be more fitting in the speculation child board

I have always been interested in derivatives and structured products, and wanted to get community's opinion about how do you manage Bitcoin price risk? While there are different strategies with options, futures, perpetuals, etc., including some people simply ignoring market swings and just forever HODLBTC; with BTC price volatility, it's not that pleasant to see that today you have $1k in BTC, tomorrow it's $10k, and then $500...

There are various researched on crypto derivatives market, but it seams that according to CoinDesk, there are mainly 2 products - perpetuals, and futures (which are nearly same, with exception of maturity), and recently options started to emerge... Isn't that pity that the so-called "innovative finance market" came only that "far" by offering what has been know for decades in traditional ("old fashioned") markets?