Here’s what crypto traders do when volatility is gone

A volatility gauge for Bitcoin has fallen in recent days to its lowest level since April, hitting 61 on Friday. That’s a far cry from the 140 it hit in May amid the collapse of the Terra stablecoin ecosystem. After rising to a record high of nearly $69,000 in November, the biggest digital asset by market capitalization has been trading in a narrow range of around $20,000 since June.

Which begs the question: what are crypto traders and investors, accustomed to the vicissitudes of the asset class, doing now to make money?

Bloomberg News spoke to a number of investors and traders about what they have done to survive the cold. Here is a by no means complete list of recent strategies:

Sales options

Julian Koh, co-founder and CEO of Ribbon Finance, a protocol for structured investment products for DeFi, says his firm has seen “increased demand to sell options” that can make money in a sideways market. Ribbon last month hit $100 million in total value locked (a crypto term to denote funds put into a project) from $70 million, and the option vaults “are doing well in this environment,” Koh says.

“Basically, it’s a way for people to express the view that the markets will continue to be flat and still make money,” he added.

Staking

Steven McClurg, co-founder and chief investment officer of digital-asset fund manager Valkyrie Investments, has been risk-off for most of the year. But he says Bitcoin is a buy when it hits between $17,000 and $18,000. “That’s when we buy. We’re waiting for those opportunities,” he said in an interview. But he also sees “good opportunities” betting on certain assets. Avalanche, for example, is a symbol he favors because it took a big hit earlier this year. Buying it and bet it can earn 8% at the moment.

Still, given how uncertain things have been, McClurg has shifted some of the firm’s assets to cash. “Sometimes doing nothing is a good strategy,” he says. Some of his strategies are more than 50% in cash. That could mean straight up, old-fashioned cash, but it could also include a stablecoin like USDC or the Gemini token.

Playing the long game

With where Bitcoin is currently trading, it makes sense to go long, according to Zaheer Ebtikar, portfolio manager at crypto fund LedgerPrime. “The market factors that I’m looking at tell me that a lot of people are positioned the opposite way, so I think the expected value is for me to go long,” he said.

He has noted the “vol crush” in the market, which he compared to Bitcoin’s last halving event in 2020. But at some point volatility will become “super attractive, the range will break and volume will rise again.”

“This makes it quite attractive to get long volatility because then you can make money if the range breaks if you think there’s another catalyst,” he added.

“Emergency Market”

One of the side effects of the crypto downturn has been that many DAOs — decentralized autonomous organizations that allow holders to vote on various proposals — are sitting on treasuries that are “in distress,” says Michael Safai of proprietary trading firm Dexterity Capital, meaning that their prices are below intrinsic value.

“The game then is: Hey, can I convince the rest of the DAO to liquidate the treasury and then pay it out? And if I do that, the liquidation value is going to be greater than the price I pay for the token,” he said on a recent episode of Bloomberg’s “What Goes Up” podcast. “And that’s because crypto prices are sometimes irrational,” he said adding that he has seen this happen recently, although his firm has not done anything similar.