A post from the Emporium Chronicles
Crypto Market Update - Last Week’s Crash
Hello everyone. Thankfully, the end of May is behind us. The past two weeks have been a whirlwind for the cryptocurrency industry as the space’s total market cap fell from 2.4 to 1.4 trillion dollars. Is it wise to buy and hold with such a frothy market cap? Are you still considering Altcoins? Many fell 60% off of all-time highs for a good few days. How do retail traders--you--hedge against extreme volatility? Clearly, it cannot be ignored. In the year 2021, is it wise to buy and hold in the crypto space, seeing as the market cap was practically chopped in half in recent weeks? Is a legitimate low-risk crypto investment portfolio possible at this point?
We will discuss many of these questions today.
Writing this, we assume most of you own some Bitcoin, Ethereum, and perhaps another blue-chip crypto or two. We recommend that you start by working backward and reading our most recent reports regarding BTC and ETH. While many other publications are offering a reflection on the current market capitulation, if you look back, you will find that we warned the market was due for a rinse. Hindsight is 2020, so take a look at our article from our first issue on May 16th, the day before Bitcoin saw the first substantial down day instead of some retrospective from someone who probably lost 20-30% or more of their net worth in recent weeks.
Today we are going to learn about hedging against extreme volatility as we advance. When it comes to price action akin to what we have seen this month, it is a matter of when not if swings in the double digits will return. Here, helplessness is not an option. It would help if you were antifragile.
How should one go about doing so? One method is a short of your long-term holdings, whether on an exchange or a cold wallet. Multicoiners are often hesitant to send large sums of coins to exchanges. To reduce counterparty risk, have more than one exchange to use.
Now, on to leverage. This term has floated around the cryptocurrency industry recently. While many people understand certain aspects of the leverage conceptually, very few people can fully articulate the 40,000-foot view of this new world we are entering.
Cryptocurrency leverage is not your boomer grandfather’s securities leverage. SO! Here’s the rundown:
You part ways with 2-3% of your legacy bitcoin/Ethereum, pay the bullshit gas fees yadayadaya (unavoidable, you know my stance on eth), send it to an exchange like FTX, and open a hedge position on a cryptocurrency like bitcoin. Now, for hypothetical purposes, let's say we crank the leverage up to 101x. What does this mean? Well, here’s where things get ridiculous. With a fraction of a bitcoin, say $5000 worth, you can trade with buying power of 101 x $5000 = $505,000.
Here’s a hypothetical step-by-step to explain the nitty-gritty: last week, we opted to short bitcoin at $56,800. We thought it would tumble. Our stoploss – the order set by the broker to automatically liquidate – or sell – the short position was $61,100. At $62,000, our position would have been liquidated automatically, BUT all we would have lost our initial investment.
You can only lose your initial amount.
Are you reading this and immediately thinking like 100 times leverage is an enormous stake than the risk tolerance you can handle? Well, you could lever your position as low as two times. All leverage does is reduce the amount of collateral you need to send to the exchanges.
Bitcoin fell to $33,000 during this trade, and we still ended up with $113,600 in buying power. So, we earned approximately 1 and a half bitcoin betting on its decline in value.
Sounds to be good to be true? For now, it is the crypto industry’s open secret. For those competent enough to put in the effort, you too can trade like this. There are varying levels and types of leveraged trading; you just need to pick one right for you based on personal risk tolerance.
Based on this is how we are seeking to help you! Instead of buying OTC on down days and holding, losing exchange fees and gas all along the way, our team is working to create a consistent strategy for staying afloat in this incredibly volatile market.
So, how do you get started?
Well…
For one, do NOT by any means hold the entirety of your capital in one broker. Countless stories of fly-by-night exit scams and network problems on crucial trading days have ruined people’s lives in this space. We recommend diversifying access to capital at various exchanges such as Binance, Kraken, Gemini, and FTX.
NEXT
If you decide you have the guts to set up a levered position, you must NOT create a position and leave it be. Liquidation risk is incredibly high in these trades; you must diligently monitor your positions at all times. If possible, minimizing the length of a trade will allow you to get in and out for a good night’s rest. Crypto markets operate 24/7; exchanges don’t ring a bell and close at 4 PM EST. Suppose you enter the leverage or futures space. In that case, there are nights where you will be waking up to monitor your leveraged trades for institutional investors who have the power to liquidate your entire profile by dumping or buying in one wick.
Leverage is a tool for calculated professionals. The market is heating up at the moment, with numerous hedge positions forming and active.
Disclaimer: If you get liquidated, do your best not to be a degen and chase your losses with more leverage.
Is buy and hold the most efficient strategy in the current climate?
My answer is… No. Even if money is not an object for you at the moment, we still hesitate to buy and hold. Why? Many of you have missed the boat. Thanks to Jim Cramer, CNN, and celebrities like Meek Mill, the crypto space is gaining mainstream traction.
This mad media dash was evident in the dogecoin rush. Most of these laymen have no idea what asset they’re holding. More down days lie ahead.
Many of you reading this have probably reached the point where you view cash as a vehicle to create real wealth via assets. Still, we get it. It would help if you preserved your bankroll for legitimate projects and once-in-a-lifetime buying opportunities.
If you spot it, we probably already bought it!
Right now, the sentiment on our minds is to make a little bit of money chasing hype projects and exit them quickly. We hold some coins with conviction as well. For those willing to put their heads down and put in the dirty work, the next decade could prove to be a golden age for traders. Luckily, this is what we do !!!
What strategies can you take to grow your portfolio with a low risk of ruin?
Smallcaps/low caps
Coins and projects with the potential to generate revenue, such as NFTs, digital real estate plots, etc., 50x levels of growth are possible with exceptional products and ventures in this space.
Trading.
Again, Emporos means tradesman. We are trading the living daylights out of this space, and you can trade too. Trading proves to be a lot of work, but with inflation looming on the horizon, the skill may prove necessary sheerly for wealth preservation at the bare minimum.
Investing
In our eyes, we consider a hold of 3+ months to be an investment. Scalp, swing, daytrade in one account and allocate some of your spoils to a portfolio with a more extended long-term outlook.
All in all, Bitcoin could swing another 10k in either direction these next few weeks. You need to know how to keep your head above water in this market. Most Twitter crypto personalities haven’t been in the space long enough to endure a bear market. It will soon become apparent who the sharks and minnows are. Which one are you? Which one would you like to be?
Take our quiz today and identify your trading style! Let’s get you set up with a short-term goal!
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