To HODL or Trade?
Back in early August a friend (new to crypto) approached me with some questions. Since he knows I run a cryptocurrency trading engine he asked me to help him get started. He was ready to take the plunge and start buying Bitcoin. He also agreed to start trading on ATN and that I could use his experience as a case study examining what it’s like to trade in the current market environment. Let’s call him “Trader B”.
A common adage in crypto is that it’s better to HODL than to trade. I believe this case study will prove beyond a doubt that the right kind of trading is better than simply HODLing. Automating your strategies, taking emotion out of decision making, and sticking to a plan are all key. In this case “Trader B” made no inputs to the system other than at setup. All trades were executed on his behalf according to his settings.
On August 12 “Trader B” deposited $10,000 to his Coinbase Pro wallet. The price of Bitcoin at the time was around $11,400. “Trader B” is now finishing his second month trading with ATN and to date he has generated over $500 by simply trading on the volatility of the market. A 5% return in 2 months alone should be exciting to anyone. But there’s more. Scalp trading this market has allowed him to “micro cost average” every dip increasing the amount of Bitcoin he buys at every swing.
Here’s the breakdown: “Trader B” started trading at the price peak during his two month cycle. He placed .002btc orders at $5 intervals with a spread of 1.3%. That means for every .002btc he buys, the system will enter a sell order at a price 1.3% higher than he bought. To date he has completed 3,730 of these trades.
If he had simply bought 0.877192btc at $11,400 ($10,000/$11,400 = 0.877192btc) his portfolio value at a current price (at this writing) of $8,400 would be worth $7,368.41. As the engine takes advantage of every market swing “Trader B” has continuously bought BTC at cheaper prices. His current portfolio value is actually $8,967.62 which represents a 22% surplus.
Another way to look at this is as follows. Let’s say “Trader B” simply takes his remaining cash and buys BTC with it. His total BTC holdings will be 1.0786174. If he turns off all trading and waits for the price to return to $11,400 he will similarly be 22% ahead at that time. If he does nothing else and cashes out at $100k his two months of trading will have netted him over $20,000!
As the price of Bitcoin continues to show reliable volatility, there is a very real likelihood that “Trader B’s” portfolio value will exceed his original $10,000 investment EVEN before the price of BTC reaches his original entry point of $11,400.
In short:
On August 12 “Trader B” decides to invest $10,000 in Bitcoin. BTC = $11,400. On October 11 BTC = $8,400.
HODLing 0.877192btc -> Portfolio = $7,368.41
Trading $10,000 on ATN -> Portfolio = $8,967.62 (+22%)
As believers in Bitcoin we all eagerly watch the trend move up and to the right. And we’ve also already accepted the risk and Bitcoin’s volatility. By the numbers, “Trader B’s” portfolio value is down 26% HODLing but if he cashed out today those losses would be mitigated 10.3% by trading. As the market continues to rise his simple gains in these two months will be compounded dramatically. Trading, in current market conditions, is clearly more profitable than HODLing.
Don’t take my word for it. Go check it out for yourself!
