Investing vs Trading Bitcoin?


May 21

Bitcoin, and some of the other cryptos, are assets which could gain or lose a tremendous amount. In fact, it would not be surprise me if the price does both, perhaps even multiple times in the future.

Most professional traders are focused on finding patterns and edge. In order to realize outsize gains, typically leverage is required which necessitates risk control. The risk control measures invites losses as the market targets the stop losses. Because traders take realized losses, there is always a moving bar that one must stay above to maintain profitability.

In fact, if Bitcoin were to rally to 23k this year and 30k next year it would not surprise me nor would it surprise me if it were to rally to 100k in a few years. On the other hand, it also wouldn’t surprise too much if it collapsed to 4k.

Given the potential for both tremendous volatility and returns, what might be some general guidelines that one could use to trade it for the long term?

  1. Don’t use leverage.
  2. Diversify across the best cryptos only.
  3. Add as conditions generally improve.
  4. Take some off at extreme highs.
  5. Take some off if in profit and conditions generally worsen.
  6. Add at extreme lows and when conditions look like they could improve but do not average down blindly.
  7. Never risk more then you would be comfortable losing. Prepare for 60% to 90% drawdowns.
  8. Consider a quantitative or systematic investment strategy.
  9. Look for changes in the narrative to provide clues.

Do you have any other ideas? Please share in the comments section.

About the Author

The author is passionate about markets. He has developed top ranked futures strategies. His core focus is (1) applying machine learning and developing systematic strategies, and (2) solving the toughest problems of discretionary trading by applying quantitative tools, machine learning, and performance discipline. You can contact the author at