Crypto Pullback Highlights Need for Active Management


VScryptocurrencies see a large sell-off at the top of bitcoin, which has fallen below $ 60,000 at its lowest. This highlights the consideration for using an active management strategy to help mitigate volatility.

The drop comes as major stock indexes are heading in the opposite direction, taking advantage of the recent infrastructure bill passed by US President Joe Biden. The strength comes despite fears of inflation hitting capital markets as consumer prices continue to rise.

In recent times, bitcoin, ether, and other cryptocurrencies have been seen as suitable inflation counterweights, especially after an uptrend in October and 2021 overall. Despite the recent weakness, bitcoin is up over 100% for the year.

In recent times, more and more investors have boarded the digital asset train with cryptocurrencies as the first entry point into the world of decentralized finance. New investors, however, may find that their tolerance for volatility is tested early in this latest pullback.

With access to real-time market data readily available through smartphones, it can be difficult to employ a set-and-forget strategy when it comes to cryptocurrencies. Investors should resist the urge to look at their portfolio balances, but it can be easier said than done.

Getting active with crypto

This is where an actively managed fund that focuses on bitcoin futures can help risk averse investors. A fund like the Bitcoin Valkyrie Strategy ETF (BTF) focuses on the optimism of the leading cryptocurrency without the constant market swings associated with digital currencies.

“The Fund will not invest directly in bitcoin. Under normal circumstances, the Fund will seek to purchase a number of bitcoin futures contracts such that the total notional value (i.e. the total value of the bitcoin underlying the futures contracts) of the bitcoin under “Underlying futures contracts held by the Fund be as close to 100% of the net assets of the Fund to the extent possible,” notes the product’s website.

BTF strengths:

  • Exposure: BTF offers entry into the world of digital currency via bitcoin, the largest market-capitalization-based cryptocurrency.
  • Access: BTF provides access to traditional funding through an actively managed fund.
  • Security: Digital currencies can be exposed to hacks on public exchanges, but BTF offers security through a regulated futures market.
  • Expertise: Navigating the cryptocurrency space requires market knowledge and technical expertise on how bitcoin behaves in relation to market cycles.

For more news, information and strategies, visit the website Encryption string.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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