Crypto Portfolio Management: Degrossing - A Method to Deal with The Volatility Dragon
Crypto Portfolio Management: Degrossing - A Method to Deal with The Volatility Dragon
Balancing Idiosyncratic Choices with Volatility Control
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Introduction
Sometimes I run into very interesting ideas on twitter that can get quite complex. My way to understand these ideas is to deconstruct them to the simplest possible format so that I can truly understand them to their core. I don’t want to just read through it, I want to understand it because some of these ideas bring value. Let’s get into the idea below.
To better understand this issue we will take the example of Alex and his quest for higher returns. Alex is a man extremely interested in the potential returns from crypto but he has a dragon to beat - volatility.
The Idiosyncratic Outlooks
Let’s imagine a character named Alex. Like many before him, he was very interested in the potential returns available in the cryptocurrencies sector. He had an idea that the key to success in any field is to make informed and individualized decisions, aka his idiosyncratic outlooks. He spent nights poring over white papers, analyzing market trend and understanding the technology behind a wide universe of coins. This wasn’t just about follow the herd for him, it was about finding unique opportunities that resonated with his investment philosophy.
As he selected his coins, each choice was a reflection of his belief in their unique potential. Some were well-known names, with the promise of stable and steady growth, while others lesser-known, offered the allure of undiscovered potential. The size of his investments in each was a careful calculation balancing his conviction against the risks involved.