Topic: How do you manage Bitcoin price risk? (Read 850 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.

Indeed BTC has less risks compared to altcoins. However on the contrary BTC is super risky compared to traditional assets. About risks and volatility overall on average it's like this: bonds < stocks < commoditiies < alternative assets < Bitcoin < altcoins.

And isn't it contradictory "bitcoin price has a risk but we can avoid that risk by investing an amount that we can afford to loss"? I am afraid it's not avoiding risk, it's simply accepting it, and actually preparing that this risk will destroy your capital.




I don't recommend any strategy actually, since it can be easily automated, and if so - it's already known and in use by someone who can do it better than any of us and faster. I think, as I noted before strategy, skills or experience are not the things which make successful trader/investor, but the financial instruments they can use. As you cannot invest in million things which are accessible to the elites of financial world.




Trading 24/7 is definitely a good thing as it allowed people to react immediately at any time to the new events as opposed to stock markets. And what you refer to about trading anything but top20 cryptos is a valid reason as those pairs have less liquidity, less coverage, thus they have more arbitrage and inefficiency opportunities to be exploited by the ones who are able to do so.

Well this is a very important topic you have choose. Im my experience on last 2-3 months  i see s a huge jump or a average dump. In this 2-3 months bitcoin help us to keep smile in our face. Though now it is in super hype because of it is breaking its all time high price records.  Though we know that we are going to see a huge dump very soon. I remember that thing that taking risk is a must choice on crypto but keep in mind that take a risk that much amount what you can afford otherwise take your profit and wait for price dump don't think what after happen your sell that price is gone up because you have think that you are now in a total safe zone wait for dump and invest again.

I understand that as.exchange is trying very hard to bring as many people as they can to their website and one of the best ways to do that is create a discussion topic and talk about that topic as much as you can, replying to everyone as frequently as you can and use that to promote their website. This is MUCH MUCH better than those shills that start a topic leave a link and leave, those are idiots, if anyone ever wants to do marketing that would be basically considered guerrilla marketing by all accounts, they should take as.exchange as example.

However it doesn't change the fact that people do have good ideas here, specially the DCA version because that usually is something that works. I would say try to reply a bit more kindly as well instead of trying to create a bigger discussion.

I'm completely aware that with the pair USDT-BTC, you could get really volatile. So whenever I'm trading right now, I stay away from it because those swings will either benefit you or kill your account in the process. With my current trading setup, I avoid the top altcoins and BTC from my trading pairs just because of those swings. I mainly regret the part where I included XMR because it left me a bag, but it's quite far from the liquidation limit.

I think the innovations on trading in the stock market have affected and definitely the same it's just that in crypto, it's 24 hours. No closing in the day or night (in different timezones). It can be called an innovation because it wasn't previously used in that category, but it doesn't mean it didn't improve.

So what strategy are you're recommending of I may ask?, holding has always proven to be more successful and the safety among all the strategies out there. Basically you lose nothing, all you just have to do is to wait. While I'm not doubting such scenario you highlighted to be the case but do understand that you're putting out some outrageous example there. Sure things will become costly but not to the extent of putting your investment into lose.

There's a reason why investing is the best bet against the future economy, the chances of having much more than your current have is certain most especially when you pick the right investment. Bitcoin is a perfect example of the right investment as it has all the features of a success investment. It has a finite supply which guarantee price increase provided the demand of the asset remains constant or increase with time which from every indications is certain.

I have to admit you basically wrote the entire trading strategy, which if implemented carefully can yield some decent returns But I would love to know about your hedging part - how do you actually hedge except for partially liquidating BTC and entering USD?

First of all you should accept the fact that crypto is volatile and you can not possibly change that, so if you started to trade crypto you should be aware of that.

All you can do is to just limit your exposure to risk using some strategies such as dollar cost averaging, hedging and of course using stop-loss and take profit all the time.

The most useful strategy would be dollar cost averaging which if used properly can significantly minimize the risk you're taking on your trades and give you a better entry price whether you're shorting or longing or just buying on spot without leverage.

You are referring to volatility trading, then why don't you try trading options since there you can make bets on volatility, or trade BTC and hedge the adversary volatility change with derivatives Also there are straddles, strangles, butterflies, etc., etc. where you can just construct the desired position to make your bet. Like that with derivatives you: 1) get higher ROI (because cheaper than spot), 2) can fine-tune your bet, rather than take 100% market up/down potential, and 3) with current crypto market state not too many people do that (yet there are some of course) so could earn decent arbitrage profits.




Just gave up on trying to manage price risk? well, that's kind of passive strategy, which is also okay. Like in capital markets in the past few years passive investors (ETF / Index holders) tend to earn more net of fees as compared to active investors. Yet, the very few among active ones can earn very substantial profits.




Yes, you are indeed correct.




If someone believes in strategy, then why not just use algo-trading or directly invest in algo-fund which employs that particular strategy then?

It takes time before you'll be able to master any strategy that you'll going to use inside this market, if what he's said is just simple and really being followed then logically most traders are gainers,

But in reality, this principle is not that easy even how you tried to established your position, there's a time that ongoing trends will hit you up to cope up with the situation.

Very important to deal with every decision that you take. Fund management is a type of skill that not anyone have, by managing it right your position inside any market is much better in the long run.

Easy to say but really hard to be done.I would ask you if you do able to spot out which is the bottom and which is the peak price?

If this thing is something that can be known or to be handled then lots of us traders are making serious profits now since we can able to handle
out those price volatility which is the most impossible thing to be done as a trader.

Managing risk will particularly talks about on how you gonna handle your capital and making yourself sustainable into this market.

It will vary on someones goal because there are people who do focuses on making some accumulation and aiming for long term and there are people who do really
make out some active trades in short span of time for them to make out some money out of those volatility or movements.Risking is always been part and
managing it wont really be that easy because it will really be affected on someones emotion when it comes on decision making.So experience will really be
the key and a strict self discipline regarding on how you do deal on such situation.If you know that you are already on gains then better to secure it.

Bitcoin volatility is indeed very high, this is what makes investors and traders think of buying bitcoin,
but take it easy, there are strategies to minimize that risk, you just need to buy gradually if the price of Bitcoin has decreased or dumped,
then your capital will be maintained.

Being in the market for a couple of years, I don't manage bitcoin's price risk anymore. I'm looking to it as something positive just as its volatility will make my investment someday higher than what I'm expecting. Just as you've said that a forever hold guy, I think I belong to that group.
No worries even if the market swings from top to bottom and vice versa, what's important to me is that I'll see someday the bitcoin I've got will rise in an unexpected price. Although it's a tough game for holders, patience is really one of the key to overcome those market swings. With the experience and witnessing and enduring several bears, it made my feeling numb as I look at the price.

Honestly I am not that great trader as to know those terms or use them in reality. I have been literally normal trader all the time and the kind who just holds bitcoin and get some profits when bitcoin's volatility shows some upward moves. The one who buy at bitcoin's lowest possible point of that month or quarter and hold for few months and take the action as soon as it goes up.

However, it's always been hard decision as to when to enter into crypto. Bitcoin is hard bitch, and just now the market gone up by 10%+ in few hours. So it's very hard to decide whether I should get in or just wait for the market to drop. These kind of decisions are still hard for me to make all by myself.

I am very interested in this thread and will see what others has to say about this.

Aren't you worried with altcoins more about price risk? There it's well possible for price to quickly collapse if you don't know the actual situation when you enter in position.

Always i worried about bitcoin when i trade btc to usd. Another i don't worried bitcoin i try to only growth satoshi alt coin buy sell.

Yes, that's why with actual trading strategies and risk management techniques there's no sustainable method of getting rid of price risk. Those will just try to make sure that "on average" you don't lose all your money. But average is just all valued divided by N, and you never know if the next value will become so extremely negative, that it will destroy all your previous small positive values, yet still on average keeping you with modest positive returns.


Yes, you made very good point about liquidations. The reason behind that is simple. First, it's at the core of those exchanges' business model - to get you liquidated (most of the times it will happen) - then it's exchange's earnings, and you just lost everything. I saw a lot of exchanges that survive entirely on this "liquidate all" model (sometimes manipulating numbers also - to get you liquidated). Of course not everyone is like that, but the majority is. Second, with FOREX and commodities - they are more regulated, people entering there overall are moree educated (by % of total capital in FOREX + commodity vs. crypto) thus they know more about what they are doing. And those people actually try to invest, as opposed many newcomers in crypto who know nothing about leverage or Bitcoin, but heard in the news that Bitcoin always goes up, and see leverage of 100x and think "Im gonna become next Bill Gates tomorrow with this". Once crypto truly becomes mainstream (I believe it will eventually) the trend for liquidations will somewhat balance for FOREX, commodities and crypto.

As for the new products, I would really appreciate your, and other's opinion about this, where we describe a new type of financial product (new not only for crypto, but for any other market you can imagine; not advertisement, but truly appreciate all your comments and opinion on this): https://bitcointalksearch.org/topic/--5299655

And yes, when BTC price keeps growing - everyone is happy (apart for shorters of BTC ), but once it reverses (and you never know when it will start - maybe after few minutes you check the price) - then here comes the downside which most of the people didn't bother to / didn't know how to protect. And the value of BTC is very unlikely to stay same - back in 2018 you could buy 1 apartment in Russia (and even in Moscow), apart from other cities. Then in 2019 - you couldn't buy even half. Now you can buy part of it probably - that's the issue with price risk.

They do offer the old-fashioned and traditional products but what's more interesting is the fact that the amount of liquidations happening every now and then are extremely higher as compared to what we see in forex and commodity derivative markets. I'm happy with what's already being provided but will definitely love to see something new rolling in so the old things get a competition. About price risk, how is it not pleasant to see our BTC's "price growth"? When the value of our BTC will remain the exact same in BTC since we hold it, it doesn't make any difference.

Truth stop limit will not work the same as you like to use it many people use it and think they will save their trade for more losing streak  . Many traders lost a lot because of this function, due to its very volatile price it is easier to hit your stop limit than your price target.  volatility is the main problem of Bitcoin and  that's why it's not good suggestions to always have this option it can easily break your stop limit many times . Risk management and good entry is the best option to enter in the market with low leverage if your in the future trading .

I assume that's because holding is just the easiest way for now. There should be someone like Robinhood but for crypto-derivatives to allow more people know about how to profit from various market opportunities in easy and simple way.

And thank you for your kind comment If you will have any recommendations or suggestions, please let me know - we will be happy to not just offer "build by traders for traders" but "by professionals for everyone", with what common people and everyone wants and understands.


No need for crystal ball at all. For example people could benefit not from "futures", but also forwards? from principal-protected products (call option combined with risk free asset)? from BTC-linked maturing swaps? cross-crypto swaps? there are many many other opportunities in fact, that are currently overlooked and ignored. But they could really benefit common people (with proper explanation of course). And apart from that there's something even more interesting that is being launched than those "well-known derivatives"😉

As for strategy, plan, etc. - you are right! But that exactly limits the "entry-level" for people. - too complicated, too hard, too risky, too volatile, too ... Shouldn't there be a pimplier way for common people to understand what it is and be able to get what they want?


Great profits = great risks, indeed mostly is the true case and known from finance theory, that expected return is compensation for taken risk. And I believe earlier in this tread I mentioned why even with long-term risk management is important. It's like with pension funds - they have very long investment horizon, but they take active approach in managing their risks. And art investors also take good care of their asset. Don't just throw painting of Picasso to the garage and say "I will come to check you after 15-20 years"

I totally didn't mean new ways of trading or new trading strategies - that's indeed a different topic (skill vs. luck vs. insight information vs. tools vs. products vs. strartegies), but I meant about new products (including what I mentioned above about principal protected notes).

With great profits comes greater risks. I don't have to manage price risk because I am a long term hodler.
I am estimating to hold at least for next 15 - 20 years provided bitcoin is not attacked by someone or something unexpected happens.
I wonder how much bitcoin would increase in price by then 
Yes, I know we have lots of opportunities to increase our capital if we trade in the swings but I have tried that and it didn't work for me well.
I lost more than I gained and so I decided to hold for long term and so far it's going good.

I think what you want is a crystal ball. In my opinion future's and options offer more than enough flexibility to maneuver your position exactly how you want. To use them at their full potential you need knowledge and practice.

To manage your Bitcoin stack against price swings try to set yourself a stop-loss and re-enter area. You need a plan, a strategy whether you are a trader or a long-term investor. 😉

To be honest, personally, I don't try to manage bitcoin price risk except the way of holdings. That means I always hold my bitcoin when I see it did go down a little bit. and wait for the time when it will come back. But I believe it may be a very weak way to recover lose or reduce risk.

Btw I really like your concern to know the people's opinion in this case. keep ahead and build your platform better.

Yes, that's one of the ways, but in such case you also lose (even though you can estimate how much you can lose), but what if the price slips and passes your stop limit without getting executed? Especially with flash crashes (which increase in frequency due to algo-trading activity (not only in crypto, but also stocks)) - stop limits typically don't save people. As for regular trading activity, it might be good, but in long-term holding BTC, wouldn't using call / put option be beneficial?

the topic is a little bit deep, but to answer the question "how do you manage bitcoin price risk" well there always a feature in exchange called stop limit option well to manage the risk in bitcoin i always set stop limit option so if i sleep and the price crash in few hours while i'm sleeping well at least i already jump out of the crash.

Sure, DCA is very common easy to implement, and relatively cheap way to actively managing your portfolio of assets / investments. However, based on history, other portfolio management strategies perform better than DCA. For example by simply implementing different ways of rebalancing portfolio, depending on market stage, you can get way better results than with DCA. And that's not to mention different types of financial products or more advanced financial strategies.

Here you can learn more about different "easy" ways of dynamic portfolio management strategies (buy&hold, constant proportion, constant mix) from Stanfrod: https://web.stanford.edu/class/msande348/papers/PeroldSharpe.pdf


You are absolutely correct about the true purpose of BTC. However, two points to be made - 1) we don't know what Satoshi had actually in mind (maybe it was a smart way to create new asset for trading? (I know sounds ridiculous, but it's possible)), 2) even with traditional currencies (USD, EUR, JPY, CNY, SDR) and commodities (gold, silver, etc.) - they are not created for making anyone rich... but because of supply & demand imbalances and market inefficiencies - they will eventually make someone super rich, and someone super poor. Same with Bitcoin. So it's like when you fall down in river, and just lay there and say "whatever happens is okay, otherwise it's too complicated trying to get out / to survive / not to "earn" / dealing with side-effects".

Furthermore, there's a great article about Bitcoin tech/economics together: http://coinmetrics.io/bitcoin-an-unprecedented-experiment-in-fair-distribution No matter what Satoshi's vision was, this is the reality that took place, and people will either suffer from side-effects (eventually they become the main effects), or will take active role in managing own wealth and earn/lose with it.

People are mistaking the purpose of bitcoin and that upsets a lot of people when the price drops. The purpose of bitcoin is not to make you rich, it never was. Do you really think satoshi created bitcoin so that you can get rich from it? That was never the case and some people assume that is the thing that makes bitcoin great. The real idea was something totally different but the idea made it so great that everyone wanted it and when people wanted it the price went higher as well, which made bitcoin something to get rich, it was like a side effect of bitcoin instead of the main purpose.

However that side effect was so strong that sometimes people started to use it as the main thing and this is why we have topics like these. If you are afraid of the price, do not get involved at all because you are not going to like it at all.

I do DCA and it helps me get better results in the long run. Obviously if you end up buying at low and selling at high you are going to make a much much bigger profit, this way you are buying from low but buying from high as well and you end up with some average price, but this works out much better when price falls and you do not lose too much money compared to other people who constantly bleed out losses during the same period.

If you learn what DCA is and try to mimic that for a long period of time, you will definitely drop the risk to a very low level as well. https://academy.binance.com/en/glossary/dollar-cost-averaging . Check this out, it is from binance so you know it is a good source and you could learn everything you need to learn about DCA from here.

I do agree with every point you made, except for only one "Holding is the most effective way to manage the risk the volatality" - forever HODLing is de-facto taking the entire price / market risk without any active participation or management. It's like as if investment funds would "buy a company / stock... and just watch". Yes, it's the way to get rid of risk of losing money on trading, but it assumes you gonna live for 100 years and will wait for BTC to reach whatever is promised. Even in that case actually if / when BTC becomes $100,000 or $1,000,000 per 1 BTC, the actual purchasing power of $100,000-1,000,000 might be same with today's $0.10... So your 1 BTC at that point might be able to buy you what you can buy today with 10 cents. As we cannot know the future, irrespective of personal beliefs about value of an asset, all possibilities are possible in the future.



True, but imagine if after $10k, market never corrects again, and you keep watching it as it approaches your "to be $1,000,000". But yes, you are very right that many people are losing the game because of greediness... that's the human nature. With the rest, I believe you said everything very correctly.

If I have 10K usd came from 1k dollar investment. I totally sell all my portfolio and wait until a new crash happens again. The reason why many traders are losing their trades is because of greediness. We feel how easy it might be when we experience a win streak towards our buy and sell method. In result, we think inconsistently making a bad decision from our trades. Cryptocurrency market is really volatile, you may become millionaire today or homeless for tomorrow. In order to become successful, we must incorporate correctly our strategy, emotions into a consistent trades.

Holding is the most effective way to manage the risk the volatality of the market brings but it isn't as easy as many people make it seem, the example you used above is a perfect scenario (although highly exaggerated) of what holders go through especially as you can't totally ignored the market as the news is always in your face. Every price movement is been discussed which makes you always monitoring your portfolio. The altcoins market is what could possibly give you the example you highlighted.


Not everything, the fact that the market moves in cycle of ups and down is certain and with that knowledge you can work on the perfect strategy to deployed in managing of your risk assuming you're not into the idea of holding.

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?




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.




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.




True, but you never know when is "the dip" comes.





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.

Futures are not so innovative. People are hedging sugar, wheat, etc. from centuries. https://en.wikipedia.org/wiki/Futures_exchange

Most 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 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.

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.

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.

Unfortunately, you are correct. As long as there is "human nature", there will be all the kinds of scams where someone earned their worth in the hard way, while others trying to just scam them or steal everything. Shitcoins are just one of many other ways to do so.

That's the reason we at as.exchange don't issue any kind of own token / currency, etc. (not advertising, but just mentioning). No need to issue new shitcoin when it doesn't serve any real purpose.



Just holding is a good strategy overall too. But from financial theory by using "passive investment strategy" (just buy and hold), you will earn just what the market earns at best. However, with "active investment strategy" (actively managing investment portfolio, rebalancing, investing in other things, protecting the downside, etc.) you might well beat the market and earn more. However, you also can earn less.

For "selling high and buying low", actually it's not purely about believing or not in BTC future, it's simply exploiting market inefficiency. Like our CEO who does strongly believe in BTC, but he firstly bought BTC @ around $1.4-1.6k, and then sold all in 2018 @ $19.5-20k, and later re-entered in 2020 @ $4.8k. Being able to identify good opportunities and taking advantage of them is probably one of the reasons we are able to launch our current company. So just imagine what you could do, if you would be actively managing your price risks also

To be honest, I don't manage any kind of price risk. Just holding them will also provide a good return. Besides, lending can be profitable as well if you are really concerned about accumulating Bitcoins. Otherwise, selling high and buying low may not be worth it if one strongly believe in Bitcoin from future perspective.

Don't expect them to be gone any time soon. If anything, the number of shitcoin projects is actually likely to increase as Bitcoin(and the cryptocurrency space) grows more as time goes.

To simply put, scams have existed since the dawn of humanity, and it will continue to exist until the end.

I see your point. In that case, when you actually use BTC to make payments (what it was created for initially), then definitely derivatives are not the best approach to do that. Even though, as current merchants index their BTC prices to market rate in US$, it could benefit to hedge risks, if you are holding like hundreds or thousands of BTC. But yes, if you are someone who cares about privacy, anonymity and independence, then holding crypto in own wallet with priv keys is the only and best solution.


For these parts - totally agree. But unfortunately as years pass, the number of shitcoins just keep increasing. Still very surprised to see that someone truly invests in new ICOs/IEOs/etc. (I don't mean the speculators & P&D groups). Until the market is cleared, probably many more years will pass, as even exit-scam projects' tokens still might be tradable, even though with collapsed liquidity. Just like some people knowingly what they do, invest in ponzis & pyramids with the thoughts that they are the smartest ones and can do what others couldn't. Until then, I think derivatives could be beneficial to that market as their main purpose is price reveleance, information discovery (spot price will react slower than derivative), and risk transfer from those who don't want it to the risk seekers, which can improve liquidity and opportunities to exit illiquid shitcoins.

Sorry, didn't know - will keep in mind for future replies.

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?