Reduce your risk while investing
Almost every cryptocurrency is extremely correlated to others. This is why when the price of bitcoin drops, most of the times, the prices of every other cryptocurrency drop as well, leading to a volatility rollercoaster.
For this reason, achieving sufficient diversification in the cryptocurrency market is harder than in the classical finance, but don’t worry, OpTy is here to help you!
We will be offering plenty of mathematical optimization strategies, with algorithm the study the variance-covariances matrices to provide you with efficient portfolio, achieving the maximum return according to your risk aversion profile.
Besides mathematical optimizations, Opy is the first portfolio optimiser that includes the implementation of Decentralised Finance stablecoins pools or lending. You can think about them as the payoff of a bond:
- They have extremely low volatility, since you are exposed to pegged only assets
- The default probability is insignificant, since loans are overcollateralized (i.e. people need to give 100$ as collateral to borrow 50$, and they get a margin call once they collateral value drops towards 60$)
- The hacking of the platform/exchange is highly diversifiable, since there are multiple platform, on different blockchains that offer such investment opportunities (if you invest in 100, even if they hack one, you can only lose a maximum of 1% of you capital)
Thanks to this asset class we are able to reduce the volatility of your portfolio to the one of any benchmark/index, but let’s see what it means in numbers:
Suppose you have a wealth of 100$, all invested in bitcoin, with annual volatility 80%, therefore the volatility of your portfolio is:
This means that in one year, on average, your portfolio may go up or down by 80%.
Suppose now, with the same amount of wealth, that you invest 50$ in Bitcoin and 50$ in anchor protocol (stablecoin farm on UST that yield ~19.5% yearly, with volatility ~1%). The new portfolio volatility will be:
Or 45% volatility much lower than the previous 80%. Suppose now that we want to emulate the volatility of the SP500, which is typically around 35%.
This process allows to emulate the volatility of basically any traditional finance portfolio, but with much better Sharpe Ratio.
It may get mathematically complicated if you hold more assets in your portfolio, but as always OpTy is here to help, and will provide you with such a service with just a few clicks!