Crypto Asset Management vs. Buy & Hold: When Does Active Management Make Sense?

Buy & hold is one of the simplest investment strategies for crypto assets: an investor buys, for example, Bitcoin or Ethereum and holds the position over the long term. Active crypto asset management, by contrast, aims to adjust positioning and risk across different market phases.

Both approaches can make sense. The decisive question is not which approach is fundamentally "better", but which suits the investor's objectives, risk tolerance, portfolio size and investment horizon – and within which framework it is implemented, for instance in professional crypto asset management.

For larger portfolios in particular, a differentiated comparison is therefore worthwhile.

The greatest advantage of a passive approach is its simplicity. No short-term market decisions have to be made, transaction frequency remains low and the investor participates fully in long-term upward movements.

Buy & hold also reduces the risk of constantly switching between positions as a result of poor timing. Anyone who is convinced of an asset's long-term development and can accept sharp interim fluctuations can deliberately forgo tactical management.

However, the investor also bears the full drawdowns. In crypto markets, these can be considerable and can persist over longer periods. Passive does not mean low-risk; it simply means unchanged exposure.

Active management treats market conditions as changeable. Trend, market structure, liquidity, volatility, positioning and other factors can shift considerably over a cycle. A market-adaptive approach translates these factors into permissible exposure.

Instead of permanently holding the same exposure, an active approach can increase or reduce risk or – where the mandate and instruments permit – also use short positioning. The aim is not necessarily to trade every short-term move. Rather, the portfolio is to be adapted to different market regimes.

Such an approach is, however, more demanding. It requires clear rules, disciplined execution and risk management that limits wrong decisions.

Investors frequently compare strategies on the basis of annual returns. For the actual investment experience, however, the path to that return is just as important.

If a portfolio loses 20%, it subsequently needs a return of 25% to get back to its starting value. After a loss of 50%, 100% is already required. Deep drawdowns therefore have a disproportionate influence on long-term capital development – they are at the heart of any serious risk management.

Active management can try to soften loss phases through reduced exposure or different positioning. There is, however, no guarantee that this will succeed in every market phase.

A passive portfolio is fundamentally dependent on rising prices. An active mandate can – where contractually and regulatorily provided for – also use short positions.

Short does not mean permanently betting against the market. It is an instrument that allows a different risk orientation in certain downward regimes. Equally, the best decision may at times be to reduce exposure significantly.

For professional investors, what matters is therefore less the number of trades than how consistently the portfolio is adapted to the market environment.

Active management typically generates more transactions than buy & hold. This can give rise to trading costs, spreads and, where applicable, further fees. These costs have to be justified by the value the strategy adds.

A professional approach should therefore not be confused with activity for its own sake. Frequent trading is not a mark of quality. What matters is whether transactions arise from a comprehensible investment process and whether execution costs are factored into the strategy.

For larger portfolios, this point becomes even more important, because liquidity and slippage can carry more weight.

The comparison between passive and active is often made in calm markets. It becomes interesting under stress. A stop order is no guarantee of a particular exit price: in fast markets, the price can jump between tradable levels, liquidity can recede, and execution can be delayed, partial or worse than planned.

The events of 10 October 2025 illustrated this: within a few hours, liquidations of around USD 19 billion occurred across the market. On several derivatives platforms, auto-deleveraging kicked in, forcibly closing even profitable opposing positions. Such events affect passive and active portfolios differently – but they affect both.

An active mandate should therefore not only have a market view, but also an answer to what happens when execution and liquidity do not work as expected.

Active management can be of particular interest to investors who do not wish to accept high drawdowns in full, who want to delegate their crypto exposure professionally or who are looking for a market-adaptive strategy within their overall allocation.

Family offices and larger private portfolios can also benefit from a documented investment and risk process. There, alongside performance, governance, reporting and integration into the overall wealth frequently play a greater role.

Anyone who, on the other hand, holds a very long-term conviction, keeps only a small share of the portfolio in crypto and tolerates sharp fluctuations without difficulty may not need an active mandate.

Active strategies can generate false signals, exit trends too early or cause unnecessary losses in sideways markets. They can also lag significantly behind a passive benchmark at times.

The aspiration of a reputable manager should therefore not be to predict every market. What matters is a consistent process that assesses probabilities, limits risk and makes decisions repeatable. This is precisely where the real difference lies between professional asset management and discretionary trading without a clear framework.

Buy & hold and active crypto asset management solve different problems. Buy & hold offers simplicity and full long-term market participation. Active management offers the possibility of adapting exposure and risk to different market phases, but in return demands a considerably more sophisticated process.

Which option makes more sense depends on the investment horizon, loss tolerance, portfolio size, time commitment and the role of crypto within the overall wealth. For larger portfolios, the active route is frequently implemented through a Segregated Managed Account.