How De-risking Your Crypto Portfolio helps in Securing Yields

How De-risking Your Crypto Portfolio helps in Securing Yields

Crypto assets, which were hitherto touted as deflationary, have witnessed an unusual sell-off in the past few days, as investors globally dumps risky assets. BTC is down -71% and ETH -73% within one year after a wide de-risking response to the Alameda Research, FTX and Genesis Implosion and also, the negative Inflation Margin, many Crypto degenerates are moving funds from Altcoins – BTC, ETH alike to stabilize asset class (presumably USDT, BUSD and USDC).

When the Crypto Market started looking wobbly a few weeks ago, it was an easy call for me to sell some altcoin losers (so many to choose from) and switch into stable-coins. But it’s good news for crypto as an asset class: Yields are lower simply because stablecoins have established themselves as a port of safety in a bear market storm.

While everyone has their own way of lowering risk, personally, de-risking to me means taking profits at certain preset levels and moving them into stablecoins or blue-chip Cryptocurrencies such as Bitcoin or Ethereum. While the cryptocurrency I’ve invested in could continue to trend higher, de-risking means that I’ve secured my profits and moved them to assets that are less volatile and have higher conviction in.

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The fact that de-risking to money market funds yielding 0% is so uninviting is partly why I’m a buy-and-hold guy in equities, I’m much of a HODLer in crypto, though but the calculus there is different. That’s partly because it’s such a nascent asset class, but also because de-risking to stablecoins is a much more inviting option in a sell-off.

DeFi traders have been switching into stables in the same way that TradFi investors have been switching into US Treasury’s. Stable-coins are a more appealing hiding spot than Treasurys, however. For one thing, the yields in stablecoins, while lower, are still better than those in Treasurys where risks seem lower. Stable-coins are not entirely risk-free: You do have to take either some Smart Contract risk with a DeFi protocol or some counterparty risk with a CeFi exchange. But do those risks seem bigger than being long Treasurys when inflation is running at 8% and commodity prices are surging? To my mind, stablecoins represent a better risk-off option than what’s currently on offer in TradFi.

In one of my Tekedia Forum publications, I emphasized on what Smart Investors should do in safeguarding their funds. It is worthy to note that investment isn’t one off traffic, there are room for gains and losses, it makes sense if your gains outshine your loss, Crypto Investments is not about UPONLY, on fundamental analysis, there is room for retracement leading to break out which form hash for uptrend candle – this presumably takes along roll shifting base.

Points to note while Derisking an Asset

  • De-risk any investment as standard procedure when it hits a 10x multiple from the purchase price or more and the investment is liquid.
  • Standard de-risk by selling up to 100% of the initial dollar value of the investment at current prices back into the market.
  • A standard procedure where to take profit on another 100%, effectively taking back 200% of the initial dollar value that was invested.
  • Take profit on a maximum of 20% of the total token position. Meaning, the profit taking part could exceed 200%.
  • At this point, one would have doubled their investment. The investment is now completely risk-free and the Investor has double the amount of capital it can put into new projects.

With De-Risking your Crypto portfolio you manage your risk, take profits on the way up and buy cheaper so you own more.

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