BTC $45135.77 (-6.0%)
ETH $3167.94 (-7.1%)
USDT $1.00 (0.12%)
BCH $572.59 (-9.4%)
BSV $152.67 (-2.9%)
LTC $165.80 (-7.9%)
BNB $385.28 (-6.0%)
ADA $2.14 (-9.7%)
DOGE $0.21 (-8.6%)
BTC $45135.77 (-6.0%)
ETH $3167.94 (-7.1%)
USDT $1.00 (0.12%)
BCH $572.59 (-9.4%)
BSV $152.67 (-2.9%)
LTC $165.80 (-7.9%)
BNB $385.28 (-6.0%)
ADA $2.14 (-9.7%)
DOGE $0.21 (-8.6%)

Protecting Your Crypto Investments in times of a Bearish Market

Protecting Your Crypto Investments in times of a Bearish Market
  • As crypto market volatility keeps on rising, investors are rushing to hedge their spot positions.
  • Most traders buy on impulse during bull markets, where a market downturn could really hurt them.
  • Premia provide crypto investors with new and innovative products to hedge their crypto assets.

As crypto market volatility keeps on rising, investors are rushing to hedge their spot positions using options to avoid a repeat of the massive wipeout experienced in the crypto market in May and June this year. Decentralized option trading platform, Premia leads the race by offering traders customized asset selection, incentive models, and peer-to-peer(P2P) market support to prevent losses from any market downturn reversal.

A shining light in the crypto market

The total crypto market capitalization soared back above the $2 trillion market capitalization mark following Bitcoin’s price resurgence from below $30,000 to nearly $50,000 and an increase in general bullish sentiments across the digital asset market. After a tough 10 weeks in the red, whereby Bitcoin set its lowest price since the start of the year, the top cryptocurrency finally witnessed a resurgence on July 21, rising to $48,000 on August 14, 2021 – representing over 60% resurgence in value.

Notwithstanding, other projects such as Ethereum (ETH), Solana (SOL), and Uniswap (UNI) have also witnessed monstrous gains in the past month – kicking off what could be another crypto bull run in 2021. The question that lingers across every trader’s, investor’s, and HODLer’s mind is – “how high can the market go this time?

However, most retailers FOMO during bull markets – buying up the assets at high prices with a plan to sell at higher prices in a short time. This leaves most traders and investors widely exposed to any major market downturn, which could lead to massive losses.

A shining light in the crypto market

Remember Q2 this year? In less than two weeks, BTC’s price fell from highs of $60,000 to about $35,000 leaving many investors with heavy asset bags or huge losses in a short time. The real issue should be how to hedge your crypto bets in case the crypto market enters a bear period like in May.

Should you hedge your bullish crypto bets?

As alluded to, the bullish momentum in crypto is back and could climb even higher as retailers jump onto the scene. However, very few traders will be able to protect themselves in case of a massive downturn in prices hence the need for hedging products whenever you hold a spot position.

One of the key forms of hedging your crypto positions is options trading. Although they have a reputation for being risky investments only expert traders can understand, options can be useful to the individual investor. They offer several advantages to the users including increased cost-efficiency, less risk than holding crypto assets by themselves, potentially higher returns, and a number of strategic alternatives to hedge.

Options are financial derivatives that give buyers the right, but not the obligation, to buy or sell an underlying asset at an agreed-upon price and date.

The call options allow you to buy an asset at an agreed price and date, while put options allow you to sell assets at an agreed price and date.

Leading the decentralized options market

Premia, one of the leading decentralized options protocols, looks to provide crypto investors with new and innovative products to hedge their crypto assets using options. The platform supports decentralized peer-to-peer option trading for covered calls and puts on various native tokens on the Ethereum network and Binance Smart Chain (BSC).

Launched in 2020, Premia Finance offers a host of features to options traders including a decentralized exchange that allows users to mint their options, stake the options to earn tokens, and enhanced security for buyers and sellers.

Unlike the traditional options market, users on the platform can create and trade custom call/put options for the cryptocurrency market setting their own strike price, expiration, and quantity. As such, users can become options writers or buyers on the decentralized platform.

Moreover, the platform also improves participation in the options market by rewarding users who provide liquidity with incentives. Unlike the traditional options markets, which are centralized and charge high fees to clients, Premia also introduces a low fee structure on the purchase of options, which all gets distributed to staking lots holders

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The platform provides users with the ability to hedge risk in protocol’s native token positions, hedge protocol risk, and in the future (when meta vaults are released), earn yield for holding their native token.

Additionally, if the market drops fast, you would feel undone by selling the assets at a low price. Premia accounts for these users (most without a hedging option) by offering staking, which allows the user to hold (and earn interest) as they await the value to go back up.

A repeat of the past?

Well, we have been here before. The crypto market rises, the mainstream population ignores it for a little while, institutions and celebrities get in on it and then floods of retailers come back pushing the market to new highs. If the market is to follow this trend once again, Bitcoin could soon reach its all-time highs at $62,000 – and a $100,000 price is very much the next target.

The crypto market is here to stay despite the never-ending predictions that it is a bubble awaiting the pop. However, if the current market volatility continues, the prices could fall again causing huge losses in spot positions hence the need for derivatives to hedge these positions.

Decentralized peer-to-peer options make it simpler for users to hedge their positions, bypassing the high fees usually charged in the traditional market. This would build a calmer and less volatile cryptocurrency market enabling the ecosystem to grow faster and gain mainstream adoption.

In conclusion, the crypto options market is growing to give investors a hedge to the rising volatility across the ecosystem. Centralized crypto exchanges offering options rarely offer affordable options to buyers, and charge high fees to trade them. With the launch of decentralized option platforms, users will have the freedom to customize their options and trade on an open P2P market easing the cost and complexity associated with crypto options.

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Lisa is excited about all things tech. She devotedly follows blockchain and crypto updates, sharing her passion through writing about it. She is a regular contributor for cryptocurrency news and articles.