How do you manage Bitcoin price risk?

[as.exchange]

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.

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.

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.

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.

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.

Yes, you are indeed correct.

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.

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

[XZERO1]

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?

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.

[as.exchange]

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.

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?

[CryptopreneurBrainboss]

...

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.

[crwth]

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.

[bearexin]

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.

[Imran232]

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.

[as.exchange]

Bitcoin has a risk but not as big as a new coin or token in crypto. If we talk about bitcoin it is the most reliable and the most amazing investment to those who have patience.While if we invest in new token or coin there is no assurance if we can earn on it. Because there are a lot of scam project that can really make us loss. I believe that bitcoin price has a risk but we can avoid that risk by investing an amount that we can afford to loss.

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.

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 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.

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.

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.

[as.exchange]

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.

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.

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.

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.

I consider BTC / USDT pair or any coin with the pair of stable coin is more convenient to trade when the market is acting either extremely bullish or bearish because we can make analysis for a coin only which saves lot of time and confusion while trading at volatile conditions. But it is better not to trade at all at bullish season until you see a huge drop on the prices which convince you that bullish trend got exhausted.

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.

[crwth]

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.

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. 

[as.exchange]

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. 

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).

[crwth]

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 )

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.

[sana54210]

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.

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

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.

[as.exchange]

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.

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.

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.

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).

[globalpain]

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.

[dunfida]

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.

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.

[GreatArkansas]

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.

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%
(....)

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.

[as.exchange]

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.

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...

[Oilacris]

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.

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%
(....)

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.

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.

[as.exchange]

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.

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.