We spoke with the CEO of Heleum about market volatility and what users can expect from V2!
Heleum, launched in late 2017 with the goal of making it easy for the mass-market consumer to get involved in the cryptocurrency space. However, in early 2018, the crypto market crashed and it affected Heleum users (as it did the majority of the crypto market). The Heleum team realized they needed to work through their algorithm to better adapt to navigate market volatility.
As with most Heleum users, I've been anxiously watching my balloons sit inactive while eagerly awaiting the launch of V2 (and seeing my balloons start moving again)! I had the chance to catch up with Heleum's CEO, Pace Ellsworth, to discuss what users can expect from V2, and what the team has learned from their 2017 launch – now.
The Crypto Crash: How It Affected Heleum Users
Ellsworth built Heleum for the purpose of making the crypto market more accessible for everyday consumers. The goal was to step away from the idea that consumers buying cryptocurrency needed to be financial experts or needed to watch the market all the time. 99.9% of people don’t have time to be a full-time trader.
After Bitcoin reached an unseen peak price of $19,500 at the end of 2017, the new year proved to be devastating. Bitcoin lost more than half of its value, and all other cryptos dropped in value as well. As Ellsworth explains, “Version one of Heleum did not anticipate or protect users from the market-wide crash. In fact, the strict buy-low and sell-high strategy meant that users’ funds remained in a cryptocurrency that was crashing. As a result, some users could have potentially experienced losses between 60 - 80% from 2017’s peak.”
While these losses were equivalent to what investors and those “hodling” crypto experienced, Ellsworth acknowledges that the design of the algorithm was not fully adapted to the potential market volatility nor did it address the potential of an automated trading system. Even though risk management can be tricky in crypto, Ellsworth values the importance of it when it comes to Heleum. “We did not anticipate the high crash and we should have been better prepared. We tried to set expectations with our users regarding volatility, but with the volume of the crash, it was hard for many of them to internalize that our system wasn’t built to protect against large drops. In the end, we realized we needed to do better.”
A Change For The Better: New Algorithm, New Strategy
Ellsworth summarizes the new direction of the app, “It's shifting from a buy–low–sell–high strategy to a buy–rising–sell–falling strategy.” In order to achieve this, the company is upgrading all of its core algorithms to reflect the new approach. In the past, Heleum had focused on performance in up-markets, but now the upgrades will maximize protection for users.
“The way a balloon worked before was that it would get into the first cryptocurrency it could find, stay in there until it would find a cheaper one, then move into that next one and just repeat the process over and over to take profits and, in the end, return to fiats (government–issued money),” Ellsworth explains.
In V2, instead of one balloon at a time, all balloons will be active right from the start waiting for the right time to move into a cryptocurrency that is rising in value. “Ride a rise and then get out; wait again for the right timing to get into another rising crypto — rinse and repeat,” he describes the new system.
In order to accomplish this, the team is implementing improved algorithms that ensure that user funds are moved back into fiat currencies as soon as cryptocurrency prices are dropping. “Fiats, because they are generally less volatile, are a good place to protect the value of your investment while cryptocurrencies are dropping.”
1. Less Time Spent in Cryptos
In the previous version of the app, funds used to hold in cryptos for several months but will now be a much faster process in V2. Ellsworth says, “We're aiming for a balloon to spend an average of somewhere between one to three days in one cryptocurrency — not weeks and weeks.”
The accelerated speed allows the system to determine the best times to get in and out of the market more consistently. Heleum defines the “best times” as “rising moves reflecting increases in the range of 5% to 10%.”
“We're being far more discerning and methodical about the time when balloons get in,” says Ellsworth, adding that, “The balloon(s) will get in right when the opportunity is jumping the fastest and then ride that for as long as the rise lasts. Once it turns around and starts falling again, the balloon(s) will get out. If the opportunity doesn’t always pan out, the balloon will wait for the next one to recover.”
2. Improved Currency Selection
Since Heleum is integrated with Uphold, it looks at all of the different cryptocurrencies that are available in your Uphold wallet at the same time to select which ones a balloon should move into.
“Currently, there are eight cryptocurrencies on Uphold. At the launch of V2 we are going to start with six of the eight, for a number of reasons including lower fees,” Ellsworth clarifies.
To analyze the best times to buy and sell, V2 will automatically gather new pricing stats from each of these six cryptocurrencies every few seconds to detect which ones are rising the most. “If they're not rising fast enough, then the system just ignores them — it waits for the moment when they are rising fast enough when moving a balloon into it makes sense.”
3. Rigorous Testing
In order to create confidence in the new algorithms, Heleum’s team has done extensive testing. According to Ellsworth, “We’ve done tests at different stages of development. Just today, we've run a number of tests eliminating those that are not optimal and focusing only on the ones that show the most relevant results.”
Benefits To Users: Risks of Volatility Decreased During Crashes
All of these upgrades serve the goal to operate in a way that limits losses during a market crash. “Under V1’s algorithm, most of our users were devastated to see that their funds stayed in cryptocurrencies throughout the crash, losing most of their value.” This impactful experience led Ellsworth to carefully consider a safer path forward for Heleum users, explaining, “Our users were very patient with us as we analyzed the faults in our automation during the crash to avoid the same situation in the future. Our retention was high throughout the crash and recovery, and we want to make sure we earn the ongoing support of our users through this improved technology.”
I'm excited to report as I finish this post, 3 balloons have moved from BTG to BAT and look forward to seeing more moves, soon!
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