415 sats \ 4 replies \ @spacewrangler 11 Jul 2023 \ on: We are the co-founders of Atomic.Finance, AMA. (Non-custodial BTC yield) bitcoin
How easy is it to lose money/Bitcoin using Atomic.Finance (how does one earn yield vs lose it) ?
Great question!
Will explain this in a few parts.
#1 There's no free lunch in bitcoin… 🍔
So yes, you do need to take some risk to earn a return. After all, there's no risk-free rates and lenders of last resort in Bitcoin!
In particular, with covered calls, you sell an option to earn a premium / yield. The risk that you take by selling a call option is the possibility of capping your potential gains if bitcoin's price dramatically rises within the timeframe of the call option. So you may lose a small percentage of BTC in that case. ( a couple percent)
This is different from CeFi (BlockFi / Celsius) where you're risking your 100% stack with them for a couple basis points of yield
You might be saying: “But what if I'm bullish on BTC? What if I think BTC is about to rip up? Wouldn't a covered call strategy not make sense in that case?”
#2 So we designed a Passive Strategy to help you manage market risk 😎
Here's how:
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The strategy was developed and backtested using historical market data. It's a data-driven approach where the strategy enters into a covered call position only when it’s statistically likely for BTC to move sideways or downwards based on historical market conditions.
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The strategy only enters positions that are significantly “out of the money”. This means the Bitcoin price would have to rise a lot before you start losing upside.
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It adapts to the market on a weekly basis — by only entering covered call positions that are one week or shorter.
I usually say to folks: Think of the Conservative Strategy as a (transparent) autopilot 😌
Let's talk concrete examples: The bull run of Fall 2020, more recent example.
Despite BTC rising from $10K to $40K+ during the months of September 2020 to January 2021, the Conservative Strategy performed well - earning +4.21% during that time.
It managed to avoid serious losses by being conservative and remaining on the sidelines for much of this period.
Similar thing with the recent pumps mid-March (BTC pumped from below 20K to 30K in a matter of a few days / a week), as well as last month (BTC pumped from 25K to 31K in a couple days)
LMK if you have any additional questions! 💪
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Please add a #3 strategy where you "go long" by selling to people who want a covered call position
It seems like covered calls involve a taker sending 1 btc (or some other quantity) to a maker, and in return the maker sends them a variable amount of BTC later, where the variable amount is always higher in USD terms than the value of whatever quantity of bitcoin the taker originally sent them. That "guarantees" USD yield for the taker, and a USD expense for the maker, and the maker just hopes his USD expense is offset by a corresponding gain in the price of BTC. Consequently, if I think the value of btc will rise in a way that outpaces the additional value the taker will get, then I want to be a maker rather than a taker.
Does your app let me be a maker instead of a taker? If not, why not?
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BTW the app is designed for options beginners and experts alike! If you do end up checking it out, we'd love your feedback on the in app education. :)
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'We used to build for ETH
oh boy....
The strategy was developed and backtested using historical market data.
gambler's fallacy...ESPECIALLY with BTC which has No rational basis for price movement, no fundamentals.
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