Hedging your Crypto gainz.
So you’re a fiat pleb, you don’t understand that more Bitcoin is the prize and not more fiat. OK.
How do i hedge my fiat gains ?
You have 3 Bitcoins, each is worth 20k USD, and you’ve noticed the market is about to turn and you want to preserve you $60k portfolio.
1: Stable coins.
these are coins built to maintain a usd value and hence are inversely correlated to $BTC . They range from common ones such as Tether $Tether and Nubits $NBT (EDIT: Nubits is Trash Do NOT USE!), to TrustUSD $TUSD and Crtyptopia’s $NZDT.
Pros and Cons.
Pro: these coins are easily accessible via the various altcoin exchanges you use such as binance, poloniex, bittrex and cryptopia.
Con: these coins regularly have slippage during moments of high friction. Trading above or below their peg. Also depending on your location there could be tax implications when making such a trade.
2: Leverage Trading.
I suppose this is main reason you’re here. Leverage trading has become the home of degenerate gamblers constantly throwing their positions into 100x positions that will mostly likely get liquidated.
the average daily bitcoin price percentage volatility in the last 30 days is 4.6% according to https://www.buybitcoinworldwide.com/volatility-index/, a 100x margin position will liquidate you after a ~0.45% move according to bitmex. So you’re 10x more likely to be liquidated than not. Think about that.
So what is leverage useful for ? Hedging!
Back to your portfolio.
Assume you have 2 btc tied up in some Altcoins and you have only 1 btc left and you want to hedge in USD.
Move your 1 BTC to Bitmex, Bitfinex or some other margin capable exchange and margin short 3x aka 3BTC for your 1BTC collateral.
Now, assuming BTC dumps 10% (-$2000), your altcoin bags are down 10% vs USD(-$4000) but your margin position is up 30%(+$5400). this covers the USD loss from your Margin position($2000) and your Altcoin position($4000); mostly(you still made a loss of $600, but it’s better than a $6000 loss).
The less margin you work with the better, this reduces your odds of liquidation (at 3x btc would have to pump 50% to get you liquidated).
PRO: this is all denominated in btc, you skirrrrt the tax liabilities.
CON: this is all denominated in btc, so if your shorting you still lose some money(the aforementioned $600).
3: Bitcoin is King.
another option is to repent of your nocoiner ways and realize that Bitcoin will go and down vs USD in the short-term but that’s none of your concern cos BTC is bullish longterm.
Forget the USD value and stack more bitcoin.
but what do i know i’m just another out-of-touch “OG” maximalist.
*Disclaimer, this is not investment advice, i am not certified or accredited and have no fiduciary responsibilities to you. my math could be wrong and i have no idea what i’m talking about(you wouldn’t know either, you spend tons of money gambling without having done the math). DYOR!
Use My REF links: Bitmex , Binance, Cryptopia.