Popular YouTube Quantitative analyst Benjamin Cowen says he doesn’t believe crypto is headed toward a bear market, but the best way to protect yourself from downside risk is to hold a majority of Bitcoin and Ethereum; and less altcoins for when the time comes.
Cowen made his comments during a round table with Rob from Digital Asset News and James from InvestAnswers while the trio was discussing the best portfolio strategies for surviving a potential “crypto winter.”
“I don’t think we’re knocking on the door of a crypto winter right now,” said Cowen, “but even if we were, I would have to imagine the severity of it would not be as bad as something we saw like in 2018 or in 2014.”
The analyst pointed to the Bitcoin price not being too far extended from key moving averages, as seen in the past. “We’re not nearly as extended right now as as you typically are before a crypto winter, we’re just kind of at the same prices we’ve been at for a long time.”
Ben Cowen from IntoTheCryptoVerse is known for his long term market perspective rather than short term swing trades. His focus is mostly on top market cap coins, or “blue chips” because they feature the least downside risk when compared to lower market cap assets.
“Having some blue chips or majority of your portfolio in blue chips I think is a good way to go, especially Bitcoin and Ethereum. They’re probably going to bleed the least amount. You’ll probably see your altcoin valuations go down against Bitcoin significantly if [price] falls below the 20-week sma.”
Cowen holds a doctorate in nuclear engineering and is known for applying advanced mathematics to analyze the crypto market. One indicator he notes often is the Sharpe ratio, which is is used to help investors understand the return of an investment compared to its risk.
“So one way you can minimize your downside risk is is making sure you have Bitcoin and Ethereum. If you run modern portfolio theory on this, the Sharpe ratios and Tortino ratio out of Bitcoin and Ethereum, it says 65% Bitcoin 35% Ethereum maximizes your risk adjusted returns.”
Cowen also noted the importance of comparing altcoin valuations against Ethereum to ensure the most efficient returns. He used Litecoin as an example, noting that it has fallen 97% against Ethereum over the last two years.
You can check out the full comments by Ben Cowen and more crypto discussion on the Digital Asset News YT channel.