🟢Buckets Analytics
Empowering you with insights and foresight on all buckets.
Simulations (coming soon)
Visualize and simulate different scenarios for your investment positions, enabling you to make informed decisions.
Suitability
Ensure that your investments are in line with your personal goals and risk tolerance by exploring various methods that can assist you in determining the best match for your financial aspirations.
Method 1: Risk Assessment Questionnaire Complete a comprehensive 13-question risk form designed to assess your profile and risk tolerance. Upon completion, you will receive a risk score that corresponds to your risk profile. A higher score indicates a greater tolerance for risky investments. This will unlock a range of investment opportunities tailored to your profile.
Method 2: On-chain Analysis (coming soon) Analyze your on-chain history to identify the types of experiences, actions, and protocols you engage with, which will help determine your risk profile. This method will soon be available to further refine your investment decisions.
Risk Score
To develop a comprehensive risk score that allows for effective comparison of different strategies, Buckets.fi recognizes the unique risks associated with blockchain-based assets, which differ from traditional finance. Our innovative approach ensures that the risk score captures the specific vulnerabilities and challenges inherent in this domain. While we draw inspiration from established approaches used in rating traditional asset classes, we also tailor a framework specifically to the unique characteristics of blockchain-based assets.
Understanding the behavior and risks of crypto assets is crucial in determining an appropriate risk score for cryptocurrencies and comparing them to traditional asset classes. To introduce the intrinsic risk characteristics of cryptocurrencies, here are a couple of charts showcasing all tradable tokens on the Binance exchange as of September 30, 2023, with at least 365 days of price history (438 tokens).
Distribution of annualized volatility
Key takeaways:
Most tokens exhibit an annualized volatility of over 100%.
This volatility is significantly higher than that of equities, which are considered among the riskiest assets in traditional finance, with a volatility range of 20% to 40%.
The few cryptocurrencies with volatility below 5% or 15% are either stablecoins or tokenized gold.
Distribution of maximum drawdown
Key takeaways:
Most tokens have experienced at least an 80% drawdown from their peak. It's important to note that using tokens with longer price history would likely reveal an even worse picture, considering the latest price peak occurred over a year ago.
Once again, this drawdown is significantly higher than that of traditional assets.
The chart highlights the distinction between stablecoins, which exhibit low volatility and maximum drawdown, and other assets. There is no middle ground that aligns with equities in terms of risk.
Considering these factors, our risk score reflects the fact that cryptocurrencies are not just slightly riskier than stablecoins or traditional asset classes but significantly more risky. Additionally, we take into account specific risks related to the chain, protocol, or tokenomics. We consider dozens of parameters to calculate a single score for any investment strategy.
The risk score ranges from 1 to 10, with 1 indicating the least risky and 10 representing the most risky strategies. It's important to note that these scores do not reflect any investment views or recommendations but provide an objective assessment of exposure to typical risks in the DeFi space. Other risks, such as depeg risk and regulatory risk, are not considered in this score, so it should be interpreted in conjunction with your own research (DYOR!).
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