How Stoic Works in a Bearish Market
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Stoic’s portfolio strategy is best positioned for a bullish market.
As a long-only strategy, Stoic’s portfolio will fall during a market correction. Yet the strategy should cut losses quickly, decreasing the depth of the drawdown when compared to manual trading.
It’s important to understand that market correction is inevitable. This is a part of the price discovery process.
And volatility is what drives the returns. Early crypto investors (and even in 2021, anybody interested in crypto is still early) are paid to tolerate this volatility. If crypto had no volatility, no risks of double-digit crashes, then there would be no chances of making the gains.
To quote the ancient Stoics, you can think of volatility as an inescapable tax of life.
“Now, all the things which cause complaint or dread are like the taxes of life—things from which, you should never hope for an exemption or seek escape.” — Seneca.
Still, to soften the blow of market sell-offs and buy crypto assets at discounts, Stoic holds some portion of its portfolio in USDT (a USD-pegged stablecoin) as a hedge.
The USDT hedge would decrease the overall drawdown of the portfolio. And should the market crash, Stoic would also use this money to buy assets at discounts.