2021 has been a strong year for cryptocurrencies. Bitcoin (BTC), Ethereum (ETH), Binance Coin (BNB), and dozens of other popular cryptocurrencies reached their all-time highest values following a period of near unrelenting growth.
But despite the overtly bullish sentiment right now, savvy investors are already beginning to make preparations for when the market inevitably enters a bear season. Here, we take a look at three of the major platforms these users might use to protect their portfolio in a bear market.
Profit From A Declining Market
Though it’s true that a bear market isn’t great news for short-term holders and bulls, opportunist traders and bears can make the most of a bad situation by trading options in order to profit from a declining market.
Options are a type of financial derivative that allows traders to speculate on the price of an asset at a particular date. They allow buyers to buy or sell an underlying asset at a given price within a given time frame as specified in the option contract.
They’re divided into two types: call and put options. Call options give the holder the opportunity to buy the asset (at a specific price) at option maturity, whereas put options instead allow the holder to sell the asset at a specific price when it matures.
The easiest way to profit from a declining market is by buying a put option through a platform like Premia — since it allows you to buy options attached to practically any underlying asset. Think Ethereum is going to fall over the next month? By an Ethereum put option at its current price and sell it for a profit at maturity. The same system works for more than a dozen other supported assets, including Wrapped Bitcoin (WBTC), Chainlink (LINK), and more.
You can find call or put options for a wide range of assets with various expiries on the Premia marketplace — or if you can’t find what you’re looking for, simply create your own option! This gives you the flexibility to turn a profit if any supported cryptocurrency enters a decline.
Predict Dips In Advance
One of the best ways to avoid holding a coin during a decline is to simply predict when it’s likely to begin entering a downtrend — and exit that market in advance.
Now, doing this is easier said than done, due to the complex interplay of factors that can cause a cryptocurrency to begin losing value — such as negative press coverage, increasing supply, increased competition, and adverse events.
It’s also difficult to determine when a dip will be transient, or something more sustained. After all, you wouldn’t want to exit a market on a flash dip and miss out on the potential upside.
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FTX crypto derivative exchange— a platform that provides a range of market analysis tools and educational resources — offers a solution. The crypto exchange is widely known for tokenized stocks. You can trade stocks like Tesla, Netflix, Apple etc. and also participate in trending predictions based markets.
Binance also has started a tournament type price prediction platform whereby you can predict Bitcoin prices with adjusted riskThe tool takes insights from data sources across social media and uses these to predict the value of cryptocurrencies at a later date. Users can use this prediction as part of their investment strategy, to help identify suitable entry and exit points during both a bull and bear market.
Take Out Downside Protection
It is well known that many cryptocurrencies carry incredible upside potential, as is evidenced by the staggering gains seen by most cryptocurrencies since the start of the year.
But it isn’t always a straight run, and cryptocurrencies can experience significant downside before eventually recovering. This property can make them a challenge to trade, since it can mean holding on to an asset longer than necessary if the recovery doesn’t come — this is a perpetual worry among many short-term traders.
What if there is a way to retain all of the upside of a cryptocurrency while eliminating downside risks? Well, there is — but it’s not quite ready yet. We’re talking about Bumper, a platform that lets you easily take out a policy that will protect the value of your assets if it falls below a specified price floor.
Disclaimer: Do your own research related to the promoted company or any of its affiliates or services mentioned in the article. Coingape.com does not hold any responsibility for your damage or loss.