How to hedge your crypto portfolio from a bear market?
How to hedge your crypto portfolio - Source: Pexels
Investors in every market face market volatility and potentially steep falls. When we are overly invested in buying or selling, hedging our wallets with a hedging strategy against exchange risk is an option. This allows you to fully or partially defend yourself. Hedge your wallet is therefore critical for effective portfolio management and long-term sustainability in the ecosystem, especially in such a turbulent market. I’m going to attempt to give you some food for thought on ecosystem hedging. It’s worth noting that these suggestions are equally useful during times of decline (bear market or not).
Before we begin, I’d like to make it clear that the goal is not to dispute whether or not a bear market is still feasible. I’ll just discuss possible tactics to use if the market is “bearish” or to simply hedge your bets.
Let’s start with the basics; I’m not going to teach you anything. Having stablecoins in your wallet is necessary and nearly necessary for two reasons.
The first is DeFi (Decentralized Finance) and CeFi (Centralized Finance) (Centralized Finance). Having stablecoins allows you to earn returns that vary from 1% to more than 100%. This is possible on a variety of systems, both centralized and decentralized. The most well-known program, Celsius Network, allows you to earn a return of up to 10% depending on your asset. I’ve been using it for several years and have never had any issues.
When it comes to decentralized platforms, Aave, Curve, and even Tokemak are ideal. They collect significant amounts of cash and, for the most part, have insurance procedures in place in the case of a disaster. Returns differ depending on the asset. It’s worth noting that you may borrow on these services as well. As a result, a coin linked to the dollar may shield you from volatility while still providing you with highly attractive profits.
Be cautious, as these applications are often utilized on Ethereum, resulting in extremely high costs.
Second, it provides liquidity, making it possible to purchase cryptos at a lesser cost. If the market declines, you’ll be glad you bought at a lower PRU (Cost of Unit Price) and so diluted your positions downwards. It is also feasible to convert cryptos into FIAT for those who want to have some fun (beware of the tax).
Of course, your investor profile plays a role. Stablecoins are not a priority in this scenario since some people seek rapid profits even if it means losing everything.
Despite representing substantial liquidity in traditional markets, the latter has long been ignored in DeFi. Decentralized solutions appear to be bound for success if one believes in the ecosystem. By playing with a “strike price,” you might earn (or lose) a premium on an item.
In essence, we purchase or sell an underlying asset at a predetermined price and on a certain date. During a bear market, this might make it feasible to profit by betting on an asset’s decline (put). The lower it falls, the more money you’ll make. Your problem has been resolved. It’s available through a variety of Dapps (Decentralized Applications). Personally, I believe synthetics (including options) will play a significant role in the future. Among them, @dopex_io and its SSOVs, @PremiaFinance or even @Katana_HQ on Solana.
Bear market strategy
Let’s increase the bar with this method, which I believe applies to folks who already have a basic understanding of DeFi. This entails using a pool of liquidity as leverage and hence betting on the borrowing of tokens to benefit in the case of a market downturn.
To put it another way, when you borrow two tokens, you are indirectly shorting an asset. By betting on this, you may profit from lucrative staking in bad markets with a liquidation margin. It’s available in a variety of Dapps, including @Francium Defi on Solana.
This is a whole other register, one that is less technical but no less fascinating. Personally, I’ve been investing more and more of my gains in ICOs and small-cap stocks. Why take the chance of investing in such risky ventures? Simply said, because there are large multipliers to be had, but especially because these assets will be less impacted by the market at first, the diverse listings combined with a weak MC will result in you winning frequently (on the good projects of course).
Be cautious; so-called “early” ventures carry a significant risk because only a small percentage of them will succeed and see a token outbreak; yet, in the case of success, they are very substantial multiples. It is critical to assess the information we have at our disposal in order to mitigate these dangers.
First and foremost, you must learn about the project, its goal, and its principles… In addition, the team is an important component in a project’s success. Other details include tokenomics, vesting, listings, several sales phases, and venture capitalists…
Tokenomics of the Crypto prophecies project
In terms of gems, a project with a modest capitalization, I’m more interested in currencies whose supply is heavily staked. This allows us to benefit from the return on our asset, often in a single pool, thus avoiding IL (Impermanent Loss), which is ideal for the long term but also to be on crypto that is slightly less volatile or, at the very least, with low pressure at the sale, because the holders benefit from the yield and do not sell.
The $CRV token, for example, is frequently frozen for 1 or 2 years. There’s also $Angle and other tokens to consider. Use this link to learn more about the supply: https://dune.xyz/home
If you are bearish, having bitcoin is a prudent decision that allows you to hedge. Let me explain.
Bitcoin isn’t in many portfolios because of its low volatility, but this is precisely where the intriguing point is. Bitcoin has a smaller beta than altcoins, allowing it to participate in the cryptocurrency market while maintaining a “slight” conservative-leaning.
We’ll finish with the most logical, but I believe it’s vital to remember. Everyone appears to be bullish on the internet and holds up to six figures, but the truth is frequently quite different.
Taking advantage of opportunities is critical. This provides us with liquidity to purchase later. If we are to survive in this ecology, we must do so. Let us not stare to the moon because no one knows what tomorrow will bring. A good way to take profits is also to use your cryptos to buy real-life assets. Such as:
There are other additional “solutions,” and I’ve included the ones that sprang to me. In any event, well-executed hedging will beat the indexes.
Summary of how to Hedge your crypto portfolio
Here are the many hedging tactics; please do not hesitate to propose your techniques to me if you believe they should be included in this post; I could rework an article by delving into further detail, for example, on the options.
Investors in every market face market volatility and potentially steep falls.
Hedge your wallet is therefore critical for effective portfolio management and long-term sustainability in the ecosystem, especially in such a turbulent market.
I’d like to make it clear that the goal is not to dispute whether or not a bear market is still feasible.
I’ll just discuss possible tactics to use if the market is “Bearish” or to simply hedge your bets.