A loss limit cut BTC in a week that closed near its low, with six weeks of history
Should the fund keep its BTC exposure cut after the limit was hit, or re-enter before the week closes on the chance that the next week rebounds?
The market facts are real; the decision maker is illustrative.
The week and the position
In the week of 26 March 2018, BTC fell 19.56%, from 8,470.14 to 6,813.01, with a 10.81% drop on 29 March and a best day of only 1.97% on 28 March. The low of 6,430.00 came on Sunday 1 April, after the high, and the close sat in the lower third of the week range. Volume was below the prior 12-week average, and the market was 41.89% below its 52-week high. An illustrative fund that cuts exposure at a fixed loss limit was triggered mid-week. Only six weeks of BTC history back the rule, and the four prior weeks split two up, two down.
Judgment
The data give no support for re-entering this week. The best day added 1.97% while the worst lost 10.81%, and the low arrived on Sunday after the high, so the cut was still being vindicated at the close. Keep exposure reduced through the week's close and re-enter only by a rule written in advance, such as a fixed share of the recovery after a weekly close. Accept the chance of missing a rebound; the loss limit exists for weeks like this one.
What would change it
If price recovers a stated share of the gap between the week's open of 8,470.14 and its close of 6,813.01 before the fund's own review point, the pre-written re-entry rule applies. If weekly history grows and the limit repeatedly triggers in mixed weeks, the limit itself should be recalibrated.
What sets this case apart
Here the low came at the end of the week and the limited history undermines confidence in the limit itself, unlike a re-entry call after a mid-week rebound.