What comes to mind when you think of volatility? Unpredictability, uncertainty, opportunity, fear, or fortune?
Or have you naturally conjured an image of erratic changes, sharp oscillations from one point to another, a line that, if you join the dots, you see the complete opposite of calm, safe, and stable.
Due to our unique personal life experiences, we paint a different picture. But one truth remains: volatility is a gateway to both danger and opportunity. Risk and Reward.
Fortunately, it is not a zero-sum game. It’s not All or Nothing. You’ll be happy to learn that there is a way to manage volatility. Better still, benefit from it.
Hidden within volatility, there is enormous value. We just need to extract it.
Market volatility describes the frequency and magnitude of price movements, up or down, during a defined timeframe. The more significant and frequent the price swings, the more volatile the market is said to be.
Therefore, in turbulent markets, whether you fall victim to risk or reap the benefits of reward depends on how successful you are in investing in the price swings the market throws at you.
Risk and Reward are delicately interconnected, actually inseparable. Meaning, you can choose one to leverage the other:
Minimize your risk to get less reward or Maximize your risk to get more reward.
So let’s just take 100% risk 100% of the time!
This is where the removal of a small detail from such a widely used expression pushed millions of less risk-educated investors on an emotional rollercoaster or left them empty-pocketed.
Unfortunately, the Higher the Risk, the Higher the Reward does not always pan out, and here are 2 reasons why:
The truth is, it is impossible to gauge accurately. If we distill the meaning of risk, it’s the “Probability of loss”.
With probability core to the definition, neither the investment banker, youtube influencer, nor the town’s physic are better positioned than the other.
No one has a crystal ball.
There are indicators and formulas, but even when done professionally, there is always a degree of uncertainty due to unforeseen events. A variety of tactics exist to ascertain risk; one of the most common is standard deviation, a statistical measure of dispersion around a central tendency.
The result of any risk-reward decision can only be properly assessed while looking in your rearview mirror as the once-estimated probability crystallizes into a concrete certainty. At this point, you are either laughing or crying.
Making timely, accurate, unbiased decisions in volatile markets such as crypto is both financially and emotionally confusing. But, what if this was done systematically for us to deliver consistent results?
The idea is that investors willing to hold risky investments and potentially lose more money should be more handsomely rewarded for taking on that risk.
The Risk Reward trade-off is always a personal metric, though. Everyone has their balance. One just needs to find and manage it accordingly. For each decision, we need to consider many factors such as the market situation, the size of the risk, the size of the reward, our tolerance to risk, the investment period, the potential to replace losses, and more.
It’s not an easy evaluation process. After eliminating the noise, calculating risk reward ultimately boils down to weighing up probabilities. Probabilities are capricious (because it means that if the probability is not right, then it is wrong), and being wrong means losses – not what you want, especially when your hard-earned money is involved.
So, we constantly face a dilemma: Over maximize for risk, danger could hit. You could lose it all. Yet, over-minimize and the extent of your reward diminishes.
So what do you do?
You strike a balance. Your goal is to find the optimal remuneration for the risk you take. You graciously adjust your risk, embracing and accepting the probability of lower returns.
For each and every daily decision, we consciously or subconsciously calculate a risk-reward trade-off. We risk-adjust every step we take. When crossing the road, we use pedestrian crossings. We gladly sacrifice time for safety.
When driving to the store 2 minutes away, we wear our seatbelts. A speeding car could come out of nowhere at any moment. Again, a choice is made. We sacrifice a small degree of comfort for a greater degree of protection. The seatbelt acts as our insurance from danger.
Setting aside a % of your reward is a humanly accepted necessity against potential danger. Risk adjusting is a norm for us. It’s just not at the forefront of our conscious self.
In fact, we could argue that risk adjustment is biologically wired in us. Freedom of choice gives us the luxury to forgive a percentage of our reward in return for greater protection.
It is our animal instinct. Think about the physiological response of Fight or Flight. An antelope always adjusts its risk when faced with a young lion. Approach fast or slow, or retreat similarly.
In fact, we can not make a single decision without considering or introducing the risk-reward trade-off. Like the antelope’s decision needs to be calculative and timely, so do ours when investing.
The Buy and Hold has proved its prowess many times. Yet, in highly volatile markets such as crypto, the only predictability is unpredictability, and by definition, the inactions of the Buy and Holder means ZERO protection as you’re exposed to 100% of the risks – the full extent of both volatility and drawdowns.
There are many triggers igniting volatility, with peak-to-valley drops (aka drawdowns) being frequent and large. These lead to sometimes intolerable periods with many Buy and Holders capitulating (panic selling) with fewer gains or at a major loss.
It’s true, rebounds also happen. But we don’t know if, and we don’t know when. That’s the risk and questionable uncertainty we submit ourselves through as a Buy and Holder.
Buy and Holders believe that riding the waves of volatility will ultimately result in the best possible performance, where the current price will eventually surpass their average entry price. And in many cases, they have been right.
But what if there was a better way? A safer, more secure method to Buy and Hold where the investor is peppered with value both in bull and bear markets.
Protective, performance risk-adjusted driven Investing. Think of Libertify’s Smart Buy and Hold as an investment philosophy that wraps each asset you own with a personalized protective shield deflecting part of market dangers.
Like the Buy and Hold, it allows you to maintain a long-term view of the market but improves it by continuously adjusting your position in the market depending on the risk-reward probability.
The amount we recommend to set aside for protection depends on 1) The market condition at the time (on a daily observation) and 2) Your personal tolerance to risk.
This systematic accumulation of short-term trades within such a risk-adjusted strategy leads to an immense and measurable amount of longer-term value. But risk-adjusted investing is hard, complex, and time-consuming to manage alone.
Striking an accurate balance between risk and reward in a disciplined way can constantly be bone-shaking if it’s not your day job.
This is where Libertify helps with its performance-driven personalized, protected, and disciplined investing solutions. We do it for you.
At Libertify, the natural behavior of risk-adjusted investing has finally been made accessible to all crypto investors. People no longer need to default to a generic Buy and Hold, where 100% of their capital is exposed to 100% of the market risk.
By instinctively risk-adjusting in almost every decision we make, we can conclude that almost any performance is in fact, “risk-adjusted performance.”
It’s just less intentional, less conscious to us. It is, for this reason, we at Libertify are known for pioneering the future of conscious finance, gloriously and effortlessly transitioning our subconscious background behaviors to the foreground where they belong.
At Libertify, just like the trend, volatility is our friend. Leveraging the volatility by risk-adjusted investing treasures the many advantages of the buy and hold, yet extracts so much more.
We make long-term Buy and Hold, performance-driven investing safe and sustainable – both financially and emotionally – free from external noise and bias. There are 6 measurable benefits, clearly visible when using Libertify’s risk-adjusted investing philosophy.
When measuring the value of financial products, we must always look both at down markets (bear) and also at up-markets (bull). Whether a market is bear or bull is always the perspective of time.
Here’s how to evaluate the benefits of risk adjustment and the value that Libertify delivers.
Please note all data used was analyzed across 12-month rolling periods, over a 630-day stretch, from 10 October 2020 to July 2022.
We have taken Bitcoin as an example, as it is the most dominant market currency.
We took 292 periods of 365 consecutive days to eliminate the bias of choosing only the dates that display better performances, as often done in financial products.
For all measures, looking at 292 periods of 12 months, Libertify beats the market performance/the buy and hold in 100% of the periods.
Ultimately the reason we invest is to earn more. Overperforming market benchmarks is a goal at Libertify by finding the optimal remuneration for the risk taken. Results:
If you had joined Libertify’s risk-adjusted program over the last 630 days and analyzed any single 12-month rolling period to July 2022, even with the Bear and Bull markets, you would have over-performed the Buy and Hold in 100% of those periods.
You would have over-performed the Buy and Hold by 210.71% with returns of +27.22% vs. having an average loss of -24.59%.
Volatility can also be a measure of risk, so it’s an important metric to look at. In both bear and bull markets with Libertify, like the above, in 100% of the 12-month rolling periods, the market volatility when using risk adjustment was always lower. Results:
Volatility was reduced by 37.17% on average. Libertify’s volatility level averaged 45.34% vs. volatility of 72.16% for the Buy and Hold.
By bringing you in and out of the market by adjusting your level of risk, you will be exposed to fewer price swings and lower drawdowns than if you were to ride the full volatility of the market.
By experiencing much smaller drawdowns, you are protected from the full exposure to risk, allowing you to remain in your comfort zone and lead a normal life, liberated from emotional decision-making and the stress of crypto investing. Results:
Average drawdowns across the 12-month periods reached -27.99% for the Buy and Hold vs. -13.34% for Libertify, an outperformance of 52.34%.
Volatility was reduced by 37.17% on average. Libertify’s volatility level averaged 45.34% vs. volatility of 72.16% for the Buy and Hold.
The Libertify Smart Buy and Holders will wake up one morning with more tokens. This is a welcoming result, especially but non exclusively in declining markets when dedicated Buy and Holders are complaining.
Results:
On average, over the 12-month periods analyzed, Libertify risk adjusters saw +70.43% more coins than the Buy and Hold.
Libertify customers reap the benefits of these extra coins because going out of the market when the market goes down gives them an opportunity of buying the coins at a lower price when Libertify goes back in the market. Hence, the investor lowers his overall entry buy price.
Buy and Holders do not. In declining markets, Buy and Holders keep the same number of coins in their portfolio. In a rising market, they’ll remain the same too. In both cases, the Buy and Holders miss out on additional value as the market price crosses the average entry price threshold.
Similar to trading volatility as a strategy, risk-adjusting involves intelligently buying the dips and selling the declines resulting in lowering your average entry price. This reduction provides you with a clear, easy view of your profitability.
Results:
On average, over the periods analyzed, Libertify risk adjusters, lowered their average entry price by 24.72%, whereas the Buy and Holders average entry price remained the same.
Even though volatility sometimes has negative connotations, it’s, in fact, a gateway to opportunity.
Extracting value from volatility is a disciplined skill that requires consistent, non-emotional, unbiased, and calculative decisions that accurately weigh up the risk-reward trade-off for every trade.
This process is called Risk-Adjusting, and when done systematically, the continuous aggregation of both gains in bull markets and savings in bear markets sum up to over-perform the market in more ways than one.
But making accurate investment decisions is challenging due to unknown events causing fear, uncertainty, and doubt. Plus, everyone has their personal tolerance for risk. It is for this reason that Libertify exists – to bring personalized, risk-adjusting, and risk-management solutions to all.
@ 2023 Libertify SAS. All rights reserved.
@ 2023 Libertify SAS. All rights reserved.
Investing in digital assets is highly speculative and volatile, and cryptocurrency is only suitable for investors who are willing to bear the risk of loss and experience sharp drawdowns. Please note, all past performance or hypothetical/backtested performance as expressed on this site, is not indicative or a promise of future performance.
Investments in digital assets and cryptocurrency are Not FDIC Insured, Not SIPC Insured, Not Bank or Government Guaranteed, and May Lose Value. Before investing consider your investment objective, risk tolerance, Libertify’s fees and expenses and any trading related fees before investing. Although the goal of Libertify and the crypto seatbelt is to reduce volatility in your portfolio, there is no guarantee that your portfolio or account will not lose value, including risk of loss of your entire principal invested. Your account may experience significant drawdowns and there is no guarantee that Libertify will outperform a buy and hold strategy.
Investing in digital assets is highly speculative and volatile, and cryptocurrency is only suitable for investors who are willing to bear the risk of loss and experience sharp drawdowns. Please note, all past performance or hypothetical/backtested performance as expressed on this site, is not indicative or a promise of future performance.
Investments in digital assets and cryptocurrency are Not FDIC Insured, Not SIPC Insured, Not Bank or Government Guaranteed, and May Lose Value. Before investing consider your investment objective, risk tolerance, Crypto Seatbelt’s fees and expenses and any trading related fees before investing. Although the goal of Crypto Seatbelt is to reduce volatility in your portfolio, there is no guarantee that your portfolio or account will not lose value, including risk of loss of your entire principal invested. Your account may experience significant drawdowns and there is no guarantee that Crypto Seatbelt will outperform a buy and hold strategy.
