When in Crypto, Ignore the Noise and Trust in Your Strategy
Bitcoin sentiment has again seen all the extremes in April. But emotions are the investor’s greatest enemy. Stick to your strategy and ignore the noise!
April was again one of those months! Crypto investors had to go from heyday to crisis and back.
Bitcoin had a headstart into the month with a new all-time high around $64,500 on April 14. Whenever Bitcoin climbs to new highs, the spotlight is on, and Bitcoin is all across the news. Investors are piling in; it’s Crypto Prime Time!
Fast forward nine days to April 23, and Bitcoin had corrected by a smashing 27%. Sentiment changed, pessimism gained the upper hand, the naysayers had their big moment!
The month had a happy end, though, with Bitcoin today standing at $57,000. Not yet above the $60,000-mark, but prices have proven stable.
Volatility is foe and friend
Volatility is a double-edged sword: Price swings can cause traders sleepless nights but also create some of the best opportunities for active portfolio managers.
Take April, for example: Bitcoin’s overall April performance was -2.7% – far from a crash, but still a loss. INVAO’s Managed Accounts returned +11.36% in the same timeframe.
One reason for our April performance was that altcoins have had a great month: The altcoin index CCI30 gained +57% last month, which also helped our performance as we maintain a diversified portfolio with a balanced risk-return ratio. It’s common for altcoins to outperform Bitcoin during Bitcoin bull markets, as investors get nervous whenever Bitcoin hits a new all-time-high and partially shift funds to other coins.
We also believe that altcoins will keep performing well in May, although the recent rally means altcoins could lose momentum. We thus recommend investors stay bullish but put more emphasis on hedging the downside over the next 30 days.
Why active crypto asset management?
Our April performance again proved the strengths of active crypto asset management. Although crypto has been around for several years and has established itself as an asset class in its own right, it’s too early for a simple buy & hold approach.
Active asset management is the best way to deal with the volatility of crypto markets. Flattening the volatility is particularly important for corporate investors who use our managed accounts to diversify their cash holdings – you don’t want the volatility spikes of Bitcoin in your operational cash balance! An active approach is also the best for those with a shorter time horizon who can’t simply stay put during a potential crypto winter and wait for better days.
Investors should keep in mind that corrections like we have seen in mid-April are not uncommon in bull markets. And although Bitcoin has bounced back rapidly, that doesn’t always have to be the case. Remember 2017; it took more than two years for Bitcoin to recover. Active management can hedge against these downside risks and outperform Bitcoin in the long run. Our April performance is proof of that. Active crypto asset management works, but you have to ignore the noise and stick to your strategy.
If you want to learn more about INVAO’s Managed Digital Asset Accounts, please visit www.invao.org.