Let’s say you have US dollars in your account and buy something against Bitcoin. You buy Bitcoin, and then you use the Bitcoin to buy Ethereum. Thus, you are trading the movement of Bitcoin versus Ethereum, And when that trade is finished, you close it, you’re left with Bitcoin. If you don’t convert the Bitcoin back to dollars, you have currency risk on the Bitcoin.
My approach is if I’m trading something against Bitcoin, I have a small amount of Bitcoin, and that’s usually enough to place whatever Bitcoin trades I have that day. When those trades are finished and I’m back to Bitcoin, then I convert the excess Bitcoin back to US dollars. Same whether it’s a mean reversion system or a trend following system. Now, if you don’t want to do that, you can keep holding Bitcoin, but you’ve got currency risk or volatility risk. Therefore, if you don’t want to do that, then just don’t trade Bitcoin pairs, just trade US dollar pairs.
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