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Risk management for crypto portfolios

Structured control of market risk, position sizes, liquidity and operational risk in a highly volatile asset class.

Returns begin with risk control

Crypto portfolios can be exposed to considerable swings within a short time. Professional crypto asset management must therefore not only identify opportunities but, above all, define how much risk should be carried at any given time.
Further reading: Crypto asset management in Switzerland.

Risk layers

Core layers of risk management

  1. 01

    Position sizing

    The size of a position is considered in relation to the portfolio's overall risk and the prevailing market situation.

  2. 02

    Market exposure

    In unclear market regimes, exposure can be reduced; trading set-ups with a high statistical probability of success and an attractive risk-to-reward ratio allow risk to be increased selectively.

  3. 03

    Stop and invalidation logic

    Before a position is opened, we define the conditions under which the underlying market thesis no longer holds and the trade is closed.

  4. 04

    Liquidity & execution

    For larger mandates, order size, order type, market liquidity, trading volume and potential execution effects such as slippage must be factored into the risk assessment.

  5. 05

    Correlation & concentration

    Several positions can represent the same economic risk. We therefore look not only at the number of positions, but at their combined risk exposure.

  6. 06

    Counterparty & infrastructure

    Exchange and custody risks (CEX and custodian) as well as operational risks are part of overall portfolio risk and must be considered alongside pure market risk, including account and IT security.

Drawdown vs. volatility

For investors, what matters is not only how widely the portfolio may fluctuate across different timeframes, but above all the actual depth and duration of loss phases. Active risk management is intended to prevent individual market phases or wrong decisions from weighing disproportionately on the overall portfolio.

Market-adaptive risk control

Digital Estate combines defined risk parameters with a professional assessment of the market regime. Risk is therefore not allocated statically, but can be adjusted according to market structure, volatility, liquidity and confluence factors.
Further reading: Crypto investment strategy.

Larger crypto portfolios

As mandate size increases, risk budgets, execution, counterparties and governance become even more important. A seven- or eight-figure portfolio requires different, more professional processes than a small private trading account.
Further reading: Crypto asset management for large portfolios · Segregated Managed Account (SMA).

Defining your individual risk profile.

Risk management is not a one-size-fits-all profile. Mandate size, loss tolerance, investment horizon, existing crypto allocation, target return and the overall role of digital assets within total wealth must all be considered together.
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