HODL-ing Through the Crypto Winter
Bitcoin prices are down 85% from the all time high, Lamborghinis aren’t coming anytime soon and we need to focus on putting our cryptocurrencies to work to help us survive the crypto winter.
We are going to explore and compare 3 strategies for crypto HODL-ers on how to accumulate ROI (Return on Investments) in this bear market.
HODL stands for Hold On for Dear Life and this strategy has worked well historically for Bitcoin HODL-ers. Below is a chart that shows that the yearly lows of Bitcoin prices and the growth of HODL-ers over the past 7 years.
While HODL-ing is a great strategy, the problem of this strategy is the lack of cash flow that you might need to pay off your monthly expenses such as rent, utility, and food. At some point, HODL-ers might need to sell some of their Bitcoins in order to cover these expenses. However, please note that the past sometimes does not foreshadow the future and we caution our readers to only invest what they can afford to lose in cryptocurrencies. (This is not financial advice)
If you are HODL-ing your crypto, we advise you to withdraw your crypto into a hardware wallet. Purchase a Ledger Nano to store your crypto in cold storage here: https://bit.ly/2Ha8DpX
Trading Algorithms (Market Neutral)
This strategy is probably the most complex one covered, but has some of the higher returns. The idea is to deploy market neutral trading strategies, that is to say that one makes profit not on up or down price movements, but using strategies include arbitraging, market making and trading crypto futures on markets such as Bitmex. (Trade on Bitmex via this link and get 10% off for the first 6 months => https://bit.ly/2VRJ404 )
Normally these algorithms are dominated by trading bots, who can quickly buy bitcoin cheaply on one exchange and sell high on the other. These bots continually monitor the price across many exchanges and quickly place trades if they see any discrepancy (arbitrage) in prices. A good strategy has historically achieved 20–40% annually on average. If you are looking to get started, there are some open source projects on Github: Blackbird, Gekko, BitMEX.
If you are looking for a strategy you can do by hand, have a look at Bitmex future vs spot pricing. If conditions are right you can make profit but executing two trades by hand.
To run through an example, which existed at the time of writing, A simple strategy at the time of writing would be:
Then when the contract expires in June 2019, you would have earned $200 for every BTC traded. However, with these strategies you do not have the flexibility of withdrawing the bitcoin whenever you want.
Lending is a straightforward way to earn more Bitcoins, and the returns can be quite good depending on where you go. It normally means lending your crypto to margin traders, and this can be done directly on some exchanges like Poloniex, and Bitfinex. These returns are between 2% — 5% annually and you have to constantly log in to your account every 2 days to re-lend out your crypto if the trader decides to close the position early.
Having gone through these 3 strategies, consider your own risk profile and decide what is best for you. If you want to keep your money on cold storage, HODL-ing is the only option for the time being and you will not be able to earn additional crypto. With lending, you have the upside of earning of interest with the flexibility of withdrawing your money at any time. Algorithmic trading might offer the best returns, but it is the most difficult to get started with and requires your bitcoins to be locked up in trades.
Is There an Easier Way?
If you are not keen on setting up your own algo-trading or don’t trust the exchange wallets, www.hodlnaut.com provides a great way to earn up to 10% a year. Once your crypto is deposited, we lend it out to traders who trades on our platform. These traders will pay interest to borrow cryptocurrency from us which will be used to pay you.
The information presented in this post is not a solicitation for investment. Such investment is only offered on the basis of information and representations made in the appropriate offering documentation. Past performance is not necessarily indicative of future results. No representation is being made that any investor will or is likely to achieve similar results. Crypto trading is speculative, involves substantial risk, and is not suitable for all investors.
Hodlnaut is a platform that provides financial services for individual investors where they earn interest on their cryptocurrencies by lending to institutions. Users can deposit their crypto assets into a Hodlnaut Interest Account and earn favorable interest rates.
Our current interest rates are 6.2% APY for BTC, 6.7% for ETH, and 8.3% for DAI, USDC, and USDT. Sign up for an account today and start earning interest on your crypto!