Bringing the barbell strategy to life in the crypto space

Nassim Nicholas Taleb, the philosophical mind, financial advisor and statistician, developed an investment method known as the barbell strategy. With the barbell strategy, two distinct asset classes are paired, mainly a basket with extremely safe assets and one with more speculative investments.

Taleb describes the underlying principle of this strategy as, “If you know you are vulnerable to prediction errors and accept that most risk measures are flawed, then your strategy is to be as hyper-conservative and hyper-aggressive as you can be, instead of being mildly aggressive or conservative.”

Traditionally, the barbell approach has been applied to different bond or equity strategies. But with the risk spectrum in the cryptocurrency space increasing, as a result of the rapid development in this industry, investors can now take the same approach for these investments.

When applying the barbell strategy, multiple dimensions can be considered, including the investment in stable assets, a chain of loans or holding multiple positions, such as is true in lock trading.

A look into lock trading

Lock trading is a risk management strategy that allows users to open multiple positions — long or short — simultaneously.

The concept is not uncommon to traditional investment communities but does require a brief knowledge of trading charts. Trading charts can help analyze past trends to help you make an educated guess on the market’s behavior in the future.

Since nobody can predict the market, lock trading has been an effective strategy to help hedge investments and is often far better than a decision made by price analysis.

Looking at traditional markets, taking a locked position occurs when a trader doesn’t exit a losing trade. Instead, they will open a position in the opposite direction of the same size.

An example of this is if you open a buy position on one stock at $10. If the price were to go down to $9, you might decide to open another sell position at a lower price and avoid closing the opened buy position.

The result of using this strategy is a fixed current loss. Furthermore, if the price increases, an investor’s buy position will improve and the “sell” position will worsen. However, if the price decreases, any losses from the buy position will be covered with the profit earned on the sell position.

Lock trading is virtually the same as a delayed stop loss, giving traders additional time to wait out any uncertainty.

Strategy limitations

It is no question that the cryptocurrency world is full of ups and downs, a natural part of any market. For this reason, opening up two multi-hodl positions can help investors gain an equivalent chance of profiting since the market is likely to go up or down.

Unfortunately, few platforms would offer the ability to lock trade or make it difficult to do. It is not uncommon for traders to come across high rollover fees, commissions and additional fees tacked on hourly, daily or monthly, all of which can make this strategy difficult to execute.

Bringing this strategy to life

However, one fintech platform designed with a focus on cryptocurrency-backed lending is openly replicating the barbell strategy with the combination of its stablecoin savings accounts, multi-hodl and lock trading features.

Stablecoin savings accounts allow users to hold Tether (USDT), Paxos Standard (PAX), USD Coin (USDC) and/or TrueUSD (TUSD) for an interest rate of 12%.

For the remaining 10% of funds, the platform offers lock trading features to help its users benefit from multi-hodl. YouHodler charges a 1% fee for ten days, intending to provide traders with more funds to increase their crypto portfolio. The platform is set up in a user-friendly way for beginners who are entering these positions.

Continuing on the riskier side, the addition of the turbo loans feature provided by YouHodler allows users to multiply cryptocurrency assets by creating a “chain of loans.” To execute, users can use the “TURBOCHARGE” button to alert the platform to take borrowed fiat to buy more crypto, which is then used as collateral as another loan in the chain. Depending on user settings, the process introduces new funds and can continually repeat between three and 15 times.

Compared to other platforms, anyone can access the same high rates without becoming a “premium member” or investing in a native token to get exclusive access to certain features. YouHodler does not have a token, making all services readily available for users regardless of their financial status.

In the future, the platform plans to add more coins and tokens to the platform, focus on growth and add more features that help clients optimize their fees. The team even shares that they could “perhaps even introduce our platform to North America.”