How risky is your mix?

How the tool calculates

The mixer first turns five slider positions into shares. It adds the five values and divides each one by that total, so the result always comes to exactly 100 %. That is why the other shares fall as soon as you pull one slider up. The euro figures per class come from those shares and your total amount.

The risk score is a weighted mean. Each class carries a fixed number between 1 and 10, and the shares are the weights. Bitcoin sits at 5, ethereum at 6, large altcoins at 7, small altcoins at 9 and stablecoins at 1. These five numbers are a measure set by this tool and not a figure from any rulebook. They reflect the fact that smaller coins usually have thinner order books, shorter histories and wider swings. The resulting value is then described by its number: up to 3 defensive, up to 6 balanced, up to 8 growth-oriented, above that speculative. Those are descriptions of the mix, not recommendations.

The look back at 2022 and what in it is an assumption

2022 works as a test year because the whole market took two heavy shocks within twelve months. The Bank for International Settlements puts the loss of value in the crypto market in 2022 at more than 1.8 trillion US dollars. Of that, around 450 billion US dollars disappeared around the collapse of TerraUSD in May 2022 and a further 200 billion US dollars in the course of the FTX insolvency in November 2022. For bitcoin and ether the same source gives a price fall of around 75 % over the year. The European Securities and Markets Authority puts the market fall for the first half of 2022 at more than 60 %.

What spreading within crypto can achieve

Spreading only works if the parts move differently. Within the crypto market that is weakly developed. The European Securities and Markets Authority describes the position in its analysis of crypto-assets and financial stability by saying, in short, that practically everything correlates with bitcoin; at the same time it found a fairly stable positive correlation with the equity market and especially with technology stocks. The European Central Bank reaches the same conclusion in its financial stability review and therefore doubts the value of crypto-assets for spreading a portfolio. In practice that means ten different coins in a portfolio are not ten different risks, but mostly the same risk ten times over at different strengths. Anyone who wants to see this in the mixer can push the sliders back and forth: between a portfolio of bitcoin alone and one of small altcoins alone there are exactly 15 percentage points in the look back at 2022, 75 % against 90 %, while the stablecoin share on its own moves the figure noticeably.

Market capitalisation, that is price times circulating supply, is the usual measure of size behind the split into large and small altcoins. It says something about tradability and attention, but nothing about quality. For scale: the securities authority put the whole crypto market in July 2022 at around 0.9 trillion euro, against around 124 trillion euro of equities and around 127 trillion euro of bonds worldwide.

Where the mixer stops

The mixer replays a single scenario, and it does so backwards. It says nothing about the future, it knows no prices from today, and it takes account of neither fees nor taxes nor the timing of your purchases. Anyone buying across the year would have had a different path through 2022 than someone who bought everything at once in January. The split into five classes is rough as well: within small altcoins there are worlds between a project with real users and a coin with nothing behind it, and one slider does not show that. And the risk score measures price risk only. The risk of losing access to your own keys, or of falling for a fraud, sits in none of these numbers.

Frequently asked questions

Sources