Here’s What Crypto Traders Are Doing With Volatility

A volatility gauge for bitcoin has fallen in recent days to its lowest level since April, reaching 61 on Friday. This is a far cry from the 140 hit in May amid the collapse of the Terra stablecoin ecosystem. After hitting an all-time high of nearly $69,000 in November, the largest digital asset by market cap has been trading in a narrow range of around $20,000 since June.

Which begs the question: what exactly are crypto traders and investors, accustomed to the twists and turns of the asset class, doing now to make money?

Bloomberg News spoke to several investors and traders about what they are doing to survive the cold. Here is by no means a complete list of recent strategies:

sell option

Julian Koh, co-founder and CEO of Ribbon Finance, a structured investment product protocol for DeFi, says his firm has seen “increasing demand for selling options,” which can make money in a sideways market. Ribbon reached $100 million in the past month. The total value locked (a crypto term to denote money deposited in a project) ranges from $70 million, and its options vaults are “doing well in this environment,” says Koh. .

“Basically it’s a way for people to express the idea that the market will remain flat and still make money,” he said.

expressed

Steven McClurg, co-founder and chief investment officer of digital-asset fund manager Valkyrie Investments, has stayed risk-averse for most of the year. But he says he buys whenever bitcoin hits between $17,000-$18,000. “That’s when we’re buying. We’re looking forward to those opportunities,” he said in an interview. But he also sees “good opportunities” with some assets at stake. Avalanche, for example, is a coin it supports as it took a huge hit at the beginning of the year. Buying it and betting it can currently earn 8%.

Still, given how uncertain things are, McClurg has shifted some of his firm’s assets to cash. “Sometimes doing nothing is a great strategy,” he says. Some of their strategies are over 50% in cash. This can mean straight, old-fashioned cash, although it can also include stablecoins such as USDC or the Gemini token.

play the long game

According to Zaheer Abtikar, portfolio manager at crypto fund Laserprime, where bitcoin is currently traded, it makes sense to go for the long haul. “The market factors I look at tell me that a lot of people are positioned the opposite, so I think the expected price for me is long,” he said.

He noted a “volume crush” in the market, which he compared to the event of bitcoin’s last halving in 2020. But at some point, the volatility is “super attractive, the range will break and the volume will rise again.”

“This makes it very attractive to get long volatility because you can make money if you think there is another catalyst,” he said.

‘Distressed-asset market’

One of the side effects of the crypto recession is that too many DAOs – decentralized autonomous organizations that allow holders to vote on various proposals – are sitting on “in crisis” treasuries, says Michael Safai of proprietary trading firm Dexterity Capital. , which means that their prices are lower than their Treasury value.

“The game is, hey, can I convince the rest of the DAO to liquidate the treasury and then pay it? And if I do, the liquidation price is going to be higher than the price I pay the token. I am,” he said on a recent episode of Bloomberg’s “What Goes Up” podcast. “And that is because crypto prices are sometimes irrational,” he said, adding that he has seen this happen recently, although his firm has done nothing.