Investors vs Traders
Investors detest volatility. Traders love it. While it might be off putting to investors to see their net worth tank by a a quarter in a short duration of time, its is definitely exciting for traders to profit from the market movements in either direction. As a trader, you don’t care if the markets are going up or down, you simply go long or short and can profit equally from both.
In-fact traders usually make more money shorting an asset during market crashes then they make from going long during bull runs. This is because of the inherent asymmetry of the market movements, while markets rise slowly, they tend to tank rather quickly when something spooks out investors.
How to profit from crypto volatility?
Traders use a number of techniques to profit from volatility. Once such strategy is called the straddle. In traditional markets you create a straddle using at the money options (call and put with the same strike price) or out of money options (called a strangle) to profit from volatility. However since traditional options are not available on crypto exchanges, you can use spot and futures markets to go long and short at the same time and then removing one part of the straddle once market takes a clear direction. It requires a lot of trading experience to know when to get in and out of a straddle to counter volatility. But Botsfolio can help you if you are not a full time trader.
How Botsfolio handles volatility
While majority of money invested using Botsfolio goes on to create a long term factor-based portfolio, a smaller part of your capital is used to trade futures instruments. This part of your capital makes profit independent of whether the market is in a bull run or a bears one. That means while your net portfolio might be going down during a bears market, the trading part of your investment will keep reaping profits from price movements. That being said, out bots also hedge your portfolio holdings to prevent any major crashes from reducing your net portfolio value. That means Botsfolio helps you benefit from price movement volatility in 2 ways
- Profit from trading (scalping, swing trading etc) to add sizeable earnings to your crypto holdings every month
- Retain your portfolio value in case of a market crash and buy more assets to increase your net holdings once the markets have bottomed out.
Using these strategies we are hoping to make the inherent crypto volatility more lucrative to investors rather than repelling them not to invest in crypto. Let us know you thoughts about other ways to benefit from crypto volatility in the comments below.