An aggressive investment strategy refers to a portfolio management style where the goal is to maximize returns by taking an unusually high level of risk. Strategies that aim to achieve higher than average returns often emphasize capital appreciation as the primary objective instead of income or safety of principal. This strategy usually entails a massive weighting in high-risk assets, with little to no allocation in low-risk assets.

Aggressive Investment Strategy Methods

There are plenty of ways for an investor to pursue an aggressive investment strategy. Below are some of the most common.

Small-cap Assets

Crypto or stocks with a small-cap provide the potential to appreciate more in value than large-cap assets. Prices can compound to over twice the original price if the business model succeeds and achieves substantial revenue growth. The risk here is that investors can lose their investment if the business fails. 

Emerging Markets Investments

Investing in emerging markets can quickly compound as the economies of such countries grow. The risk is that there might be a lack of quality institutions and governance in these countries. As a result, there is high regulatory and political risk.

High-Yield Bonds

High-yield bonds are a great source of yield for investors looking for huge returns and regular cash flow. These are high coupon bonds with below-investment-grade credit ratings, often called junk bonds. The risk is that the issuing company could go bust, rendering the bonds worthless.

Options Trading

Options can be used to speculate on movement in the prices of securities. They are built as non-linear securities, which can offer a constant source of income in times of low volatility or generate huge payoffs during huge market movements. The risk is that investors could lose more than they make over time on a single market move that goes against their position.

Private Investments

Private investments or private funding rounds are preferred by accredited investors. If successful, the business could compound rapidly. However, there is always a risk associated that startups may fail even before launching their products.

How to Reduce Risk?

While this strategy depends on the risk-taking attitude of investors, one should only focus on taking calculated risks. For instance, when investing in the crypto markets, one may prefer to invest only in Bitcoin and dino alts that are more stable than memecoins that offer high risk/reward. Another means of reducing risk is using a trusted exchange such as Binance, which has reasonable security measures in place to protect users’ funds.

#cryptoglossary

The complete loss of a trader's total invested capital, specifically as a result of shorting Bitcoin.

What Is Ashdraking?

The term “ashdraking” was coined following the activities of Lord Ashdrake — a pseudonymous Romanian Bitcoin trader who was prominent in the mid-2010s. 

Ashdrake was a high-profile crypto skeptic. He determinedly had a strategy of shorting BTC — that is, betting that the digital asset would decline in value. 

He enjoyed significant success between 2014 and 2015, a period of precipitous losses in which Bitcoin lost nearly half its value, and he became a prominent voice encouraging traders to adopt short positions.When Bitcoin broke $300, Lord Ashdrake again shorted the currency — but this time the market was not in his favor. 

Prices rose rapidly, breaking $500 and nearly touching $600 — just a few weeks after the $300 milestone. Ashdrake continued to exclusively hold an aggressively short position, which ultimately caused him to lose his entire invested capital.Ashdraking remains a concern for traders. In 2017, the Chicago Board Options Exchange (CBOE) became the first major exchange to offer traders an opportunity to trade Bitcoin futures — that is, to place bets on the price of Bitcoin without having to actually hold any crypto themselves. 

The CBOE launch was considered a key test for Bitcoin, and the generally crypto-skeptic mainstream financial press strongly predicted that institutional investors would take large short positions en masse. 

This did not happen, with the futures posting huge rises within just a few hours. This caused some prominent brokers to completely forbid their clients from taking short positions because of a fear that they too would be “Ashdraked.”Lord Ashdrake (or someone claiming to be him) remains a prominent voice in the crypto community. In October 2020, he gave an interview to blogger zoomerjd, in which he talked extensively about the notorious incident.

#cryptoglossary #educational

Algo-trading, also known as algorithmic trading, is an automated trading system where buy and sell orders are placed according to the rules of a computer program or algorithm. The algorithm may be configured to consider price, but it may also look at other factors such as timing and volume. As soon as the market conditions fulfill the criteria of the algorithm, the alga-trading software will place a buy or sell order accordingly. 

A simple example could be the following:

Buy 10 BTC when the ten-day moving average exceeds the 30-day moving average; 

Sell 10 BTC when the ten-day moving average falls below the 30-day moving average.

However, in reality, algo-trading involves many more complex rules and conditions to build a formula for profitable trading. 

There are many reasons why traders use algo-trading — it offers the opportunity for faster and more frequent trading across an entire portfolio that wouldn’t be possible with manual orders. Because orders are instant, algo-trading secures the best prices and reduces the risk of slippage. Algorithmic trading takes the human element out of the equation, reducing the risk of mistakes or emotional reactions to market conditions. 

On a macro level, algo-trading creates more liquid markets thanks to a higher order frequency. It also makes markets more predictable because algorithms are programmed to respond to emerging conditions. 

Although algo-trading is used across many markets, it offers even more benefits in the 24/7 cryptocurrency markets, where traders risk missing opportunities or incurring loss risks while they’re asleep. Therefore, even those who prefer manual trading can use algo-trading as a failsafe for when they’re away from their screens. 

Algo-trading can be suitable for a wide range of trading strategies. Arbitrageurs who rely on incremental price differences can use an algorithm to ensure order efficiency. Short-term traders and scalpers who aim to capture profits from smaller market movements use algo-trading to ensure they can execute at a high enough frequency to be profitable, and eliminate the risk of chasing losses. Market makers also use algo-trading to ensure that there’s sufficient depth of liquidity in the market. 

Traders also use algo-trading for backtesting a particular strategy in order to check if it’s able to return a consistent profit. 

There are some risks with algo-trading, particularly around issues such as system downtime or network outages. Algorithms are also programmed by humans, so they can be subject to human errors, meaning that backtesting is critical to ensure the algorithm behaves as expected. 

Finally, an algorithm will always do exactly what it’s programmed to do and cannot account for unanticipated “black swan” events that may call for a more human intervention and mitigating actions. 

Author: 

Alon Rajic 

#cryptoglossary

Anarcho-capitalism advocates for the abolition of centralized states, and the primacy of private property and contractual agreements in the economic system. 

Anarcho-capitalists believe that the state as it is currently conceived is an impediment to the development of a “free” society — and that the existence of states in capitalist societies result in a system of coercion. 

This political philosophy maintains that the free market is the cornerstone of a truly free society, and that people should be free to engage with each other through contractual agreements — beyond the control or oversight of the state. 

Instead of the state handling the enforcement of contracts and the resolution of grievances, private agencies competing in a free market would take charge.

Anarcho-capitalists believe that the means of production should be privately owned — and that work and commodities should be organized through the system of wage labor. 

The concept of "original appropriation" allows for any individual to claim an absolute right of ownership over any resource that has not previously been used. “Self-ownership” is another important principle, and this refers to an individual's absolute right over their own body.Many anarcho-capitalists consider blockchain-based decentralized technologies to be a means by which the practical problems of anarcho-capitalism may be solved. 

They claim that decentralized services provide an alternative to the bureaucratic functions of the state, particularly by providing immutable and publicly available records of identity and contractual obligations (the latter through the use of smart contracts.)There have been small-scale experiments in the creation of real communities organized according to anarcho-capitalist principles. The most notable of these is Liberstad, a private city-society in Norway that was founded in 2015.

#cryptoglossary

m, there are two types of entities: External Owned Accounts (EOA) and Smart Contracts accounts. 

An EOA is made up of a cryptographic pair of keys: public and private. It is represented by an address that is created after a user has set up his/her key pair. A private key is used to sign transactions; it grants users custody over the funds associated with their accounts. 

The key pair can then sign transactions from a given address. This is because the key and the account are one. This results in specific restrictions. For example, only having one key to authorize transactions and control the account. If lost or stolen, the account is likely lost forever. 

EOA’s also pose a problem because as individual accounts, they can put out single transactions which need to be verified creating gas fees each time. 

Ultimately, there is little wiggle room or customization, as users can’t create custom logic to include more signers or authorize different keys to sign on to their accounts. This creates a very limiting scope for transactions. 

Account Abstraction for Improved Users Experience

Account abstraction is a way to address these roadblocks by converting an EOA into a smart contract with its own logic for deciding what constitutes a verified transaction. This means the signer and the account can be decoupled, opening up a wider range of possibilities for account use. 

For example, account abstraction could allow the EOA to do a wide range of actions, such as using multiple or zero keys to authorize transactions or changing the signer of the account every week. 

A significant benefit of account abstraction is the improved user experience (UX) and security because of the seamless interactions it facilitates. 

It has multiple use cases and relieves some of the issues faced especially when it comes to project scaling and onboarding. 

Social Recovery and Account Abstraction

Social recovery is one of the UX improvements account abstraction provides by avoiding the issue of a single point of failure with the private key. Account abstraction can assist by creating a better security net through multiple signers. 

Account abstraction can also be used to build better blockchain games with micro-economies. Play-to-earn is already becoming such a lucrative arena but is held up by the number of micro-transactions needed to keep gameplay up with multiple NFT in-game assets across thousands of users. Account abstraction addresses this through the collective signers' mechanism.

Improved Transactions and Account Abstraction 

Finally, atomic (batch) transactions through account abstraction can allow users to pay fees in a native token rather than using ETH, which is currently the case. That makes interacting with L2s simpler and doesn’t require extensive buy-in by the user before utilizing a chain. 

Account abstraction also allows for meta-transactions. These are like a butler that executes a transaction signed by another party on behalf of the original signer. This removes complexities and gas costs on public blockchains by letting a relayer network handle these while the user just needs to sign the transaction with one click.

These meta-transactions allow the payment for the transaction to be abstracted away from the user and given to the dApp, thereby simplifying the transaction process. This is especially useful in areas such as play-to-earn gaming and onboarding tools. 

This fee abstraction can also remove the complexity of paying on-chain transactions through dApps, by allowing payments through their native token. Should a user wish to pay with a native token rather than the blockchain’s cryptocurrency (like $ETH), account abstraction makes this possible. Finally, it allows for better control of your interactions with a dApp in the form of session keys. A session key is a symmetric cryptographic key used to encrypt a communication session. More simply, it's a single-use key for encrypting and decrypting data sent between two parties. For example, should you wish to interact with a dApp but don’t want to keep signing transactions to approve every move you make, a session key sets the parameters for what the dApp can and can’t do in relation to your account. 

As such, you don’t have to trust a third party with your logins and approvals, and you can also avoid the exhausting effort of re-approving everything. 

Account Abstraction for Enhanced Security 

Account abstraction may make interacting with dApps and the user experience in web3 simpler but it also provides improved security. 

Account abstraction allows you to customize your accounts to work only when certain conditions, including the number of signers, are met. This is customizable across accounts so users can have more control, than for example a classic multi-sig. 

Some examples of customization can include actions like setting limits on transfers and multi-factor authentication. This removes the current massive point of failure in that users can lose everything if they are not extremely careful. 

Account abstraction opens up usability without risking security and even further enhances it with its adaptable options. 

Bio: Sachin Tomar, CTO and Co-Founder of Biconomy, a hyper-flexible toolkit to superpower your Web3 stack. With a background in software engineering, Sachin is working to make a decentralized world through blockchain.

#cryptoglossary

All risks is a type of insurance coverage that automatically covers any risk that the contract does not explicitly omit. For instance, in the case of an all-risks property insurance policy, if it does not expressly state that the property is not covered for flood damage, then it is covered for such an event. This policy is often only found in the property-casualty market.

Understanding All Risks Coverage

Insurance providers generally offer two types of property coverage — all risks and named perils. Named perils insurance only covers the events mentioned in the policy. For instance, the insurance policy could state that only losses due to vandalism or fire are covered. As a result, a covered person who experiences damage or loss due to flooding is not assisted as flooding is not covered as a peril in the policy. The burden of proof lies on the insured person.

All risks insurance covers all perils, except the ones excluded from the list. Thus, anything not named in the exclusion list is covered automatically.

Burden of Proof

To trigger coverage under an all-risks policy, there has to be proven physical loss or damage to the property. An insured person must prove that there is physical damage or loss. The insurer then has to prove that an exclusion applies to the coverage in a certain case. For instance, a small business could file for an insurance claim after experiencing a power loss. However, the insurer could counter and reject the request by stating that the loss of income was from a loss of power, which is not the same as a physical loss of property.

Special Circumstances

Since all-risks insurance is comprehensive, it is priced higher than other policies. Therefore, it is important to weigh its costs against the probability of a claim arising. It is also possible to have a combination of perils and all risks in one policy. So, when signing up for a policy, read the form to understand what is included or excluded.

#cryptoglossary

Alternative investments refer to any asset class other than stocks, bonds or real estate. It includes private equity, venture capital, hedge funds, collateralized loan obligations (CLOs), real estate or other non-traditional investment vehicles. 

What Is Private Equity?

Private equity investments are those that are made in private companies, as opposed to those available on public exchanges. The goal of private equity investments is to generate the best possible returns, which may be through capital appreciation, dividend payments or an eventual liquidation of the investment at a profit. Private equity can be used to finance company growth or to facilitate a corporate restructuring, such as a leveraged buyout (LBO). The financing typically comes in the form of senior debt or senior credit facility, mezzanine debt, or equity. 

What is Venture Capital?

Venture capital investments are made in early-stage companies. These are start-ups that have yet to become profitable, or in some cases, companies that have been operating profitably but are not yet public. Because of the high risk involved, venture capital investments come with a high reward, provided the investor has the patience to hold until the company receives an exit. The exit could be an initial public offering (IPO), a sale of the company, or the generation of a significant amount of cash through debt financing. There are many venture capital funds, and they tend to be large, institutional funds with a high minimum investment requirement. They generally focus on the technology sector, but there are also funds that specialize in a variety of sectors.

What Is Hedge Funds?

Hedge funds are investment vehicles that use a variety of strategies, including short selling, derivatives, arbitrage, and credit arbitrage, as well as other esoteric investment strategies that are often proprietary to the fund. They are generally open only to large investors and institutions with minimum initial investments ranging into the millions, depending on the fund. They have a high level of risk and can fail catastrophically, as was the case with Long Term Capital Management in the 1990s.

What Are Collateralized Loan Obligations (CLO)?

The CLO structure is often used to finance real estate investments, as well as other asset types such as corporate debt. The CLO is a securitization of a pool of debt, in this case, a portfolio of loans that finances the purchase of the real estate. The loans are pooled together and sliced into different risk levels, with the riskiest tranches receiving a higher payment than the less risky tranches. Investors in the CLO receive a return based on the performance of the underlying loans, but the return is often lower than the one on the underlying real estate itself.

What Is a Real Estate Investment Trust (REIT)?

A real estate investment trust (REIT) is a publicly traded company that owns commercial real estate assets like office buildings, malls, hotels, hospitals and apartments. REITs are structured as a pass-through entity, meaning they do not pay corporate taxes. Instead, they distribute most of their income to the shareholders in the form of dividends. REITs are a common alternative investment in taxable accounts, as they do not have special tax treatment like real estate held in a retirement account would. They come in different sizes, with the larger ones generally being more diversified, having lower management costs and a lower risk profile. REITs are subject to significant volatility and are not a good investment for someone who does not have a high-risk tolerance. Additionally, They have low yields, so their primary benefit is in providing tax-efficient income, but investors must be willing to accept the high volatility.

#cryptoglossary