Investors should not only have a good command of technologies and projects but also know how to avoid financial risks and improve investment returns while trading in the ever-changing cryptocurrency market.

Potential investors remain hesitant at investing in cryptocurrency market due to its many hurdles until a platform that provides crypto asset management for investors emerges, that is, CryptoStrategies.

CryptoStrategies is a crowdsourced collective intelligence platform designed for cryptocurrency investment strategies. Founded by Kenny Li and Ran Yi, the platform invites global cryptocurrency traders and strategists to publish the results of their strategies on the platform and provides different investment strategies for investors with different risk preferences.

What on earth are the similarities and differences between cryptocurrency trading strategies and traditional asset trading strategies?

Ran Yi, co-founder of CryptoStrategies, elaborated on cryptocurrency trading strategies during his interview with Suanlicaijing a few days ago.

Q&A

Trading strategies of cryptocurrency and traditional finance

Q: Are cryptocurrency trading strategies comparable with traditional trading strategies?

A: Many traditional trading strategies can be applied to cryptocurrency. For example, arbitrage strategy and trend following are two mainstream cryptocurrency strategies.

Arbitrage is the acquisition of the spread of the same asset within different exchanges. For instance, bitcoin is about 48,000 yuan on Bitfinex and probably 49,000 yuan on Binance. Under such circumstances, we can buy bitcoins on Bitfinex and sell them on Binance. No financial products have ever been sold simultaneously on so many different exchanges in traditional secondary markets.

The profitability of trend following is mainly dependent on volatility. Any asset would be the most profitable when it experiences dramatic fluctuations. At present, mainstream strategies are based on augmentation-related strategies, and we believe there will be some strategies based on cryptocurrency fundamentals in the future.

Q: What on earth are the differences between the two?

A: The logic behind crypto asset and traditional asset trading strategies is very similar and based on consideration of human nature. For example, the panic of traders may lead to irrational rise and fall in the market.

The biggest difference between the two is that cryptocurrency trading is riskier. There’s no price limit-up or limit-down for cryptocurrency, so it can fluctuate 20% or 30% at any time and can be traded on a 24-7 basis. For transactional players, this is both a problem and an opportunity.

Trading on a 24-7 basis means that trading opportunities are much greater than stocks and futures, but there are also huge risks. For example, bitcoins have dropped from 20,000 USD at the end of last year to 6,500 USD at present, a decrease of about 70%. This demonstrates the immaturity of the asset at the beginning. As far as I’m concerned, it is normal to have such a sharp fall. As the market becomes more mature, more professional investors enter the market and the regulation tightens up, there will be less volatility, less room for speculation and greater capacity

Choose big platforms and mainstream tokens to reduce risks

Q: Where do you think crypto asset management risks stem from ?

A: As I have traded on about 30 to 40 cryptocurrency exchanges, I discover that exchanges themselves are one of the risks. A big risk is that after you put your tokens on a certain exchange, you may begin to doubt whether the exchange is reliable or not. As exchanges are at the heart of the cryptocurrency circle, they have much power under such circumstances. The phenomenon that an exchange is blacklisted seldom exists in the stock and futures markets. When a cryptocurrency exchange is blacklisted and does not have enough capitals to compensate traders, traders’ tokens will be lost forever. The logic of cryptocurrency trading is similar to that of stock and futures trading. As the assets are traded on more platforms and lack sufficient fundamentals, they have more risks than their counterparts in traditional asset trading.

So we suggest that ordinary investors should choose big platforms as in principle the bigger the exchange is, the safer the system will be. Much of our work is to ensure the security of funds and tokens.

Q: How can investors reduce risks while operating by themselves?

A: For investors, they should not start with small tokens at first. Small and less-known tokens are more likely to be controlled. There is also another defensive approach. As blockchain is open, we can look at the contracting and management structure of different tokens and even see which wallets belong to which exchanges. For example, if tokens in a mainstream wallet are transferred from a big account to an exchange account, it means that price of the token may fall. This is a defensive strategy. The probability of being controlled may be lower if you choose top 10 tokens in terms of market capitalization.

Q: What are your strengths？

A：What CryptoStrategies offers is a professional asset management platform, different from asset management products launched by exchanges. CryptoStrategies focus on different strategies. We have 20 different types of strategies with subdivisions in cryptocurrency including quantitative strategy. We focus on discovering people who outperforms in trading cryptocurrencies. We will continue holding trading competitions and bring together people from all over the world who can generate returns through quantitative trading strategies. An incentive mechanism has also been established to give them enough tokens to perfect their strategies.