When trading cryptocurrency, risks arise that can not only deprive the investor of profits but also lead to losses. This usually happens when the risk is incorrectly assessed and the strategy is not appropriate. Risk is an integral part of working with cryptocurrencies, and there are ways to reduce it to a minimum and reduce the chance of loss to almost zero.
Arbitration by example
The abundance of unregulated cryptocurrency exchanges allows you to make money on arbitrage transactions, using the fact that prices for the same asset vary widely on different sites, explains Denis Voskvitsov, head of the fintech company Exantech. As an example, the expert cited the so-called “kimchi prize”.
In early April, the cost of bitcoin on the South Korean crypto exchanges Bithumb and Korbit reached 77.9 thousand won ($ 69 thousand). But the average market price of the main cryptocurrency was at the level of $ 58.5 thousand. In the field of digital money, such a difference between quotations in South Korea and the rest of the world is called the “kimchi premium.” This concept arose back in 2017 when bitcoin traded at $ 20,000, and on the South Korean exchanges, its price rose to $ 24,000 (+ 20%). At the beginning of the month, the “kimchi premium” reached 18%. As of April 14, it is 11.6%.
Conservative portfolio
To exclude losses, you need to diversify your investment portfolio as much as possible and choose low-risk assets for it, says Apoorv Gupta, Co-Founder of CAPHIQ and CMO at AMEPay. According to him, the higher the crypto portfolio is diversified, the extra evenly the dangers of depreciation of sure property are distributed over it. The greater the potential return on funding, the upper the dangers, he added.
“Altcoins and DeFi merchandise are thought-about extremely dangerous, so I might not advocate together with them in your portfolio with a method with minimal losses,” mentioned Saurabh Singla, Co-Founder of CAPHIQ and Contribution Author at INC42.
The finest state of affairs for breakeven buying and selling is long-term investments in main cryptocurrencies corresponding to Bitcoin and Ethereum, in accordance to CZ CEO of Binance. He advises to open a place not as soon as for all out there funds, however to periodically purchase extra property in equal elements. This will enable to common the acquisition value and scale back the dangers of coming into the asset on the peak, added by CZ.
Futures
According to Denis Voskvitsov, in concept, you may commerce cryptocurrency with out loss utilizing bitcoin futures with supply in a couple of months – they’ve a formidable premium to the spot market. The professional defined that on some crypto exchanges the premium could be up to 40%.
“What ought to a dealer do? Buy on the spot market and promote futures and, after a while, revenue from the truth that the costs of futures and spot come nearer (when the expiration date approaches), ”mentioned the Founder of GMCoin Mehmet Ali Demirci
The catch of this method is {that a} quick place includes borrowing cash from a dealer or alternate, warned Denis Voskvitsov. And this isn’t an interest-free mortgage, and the fee drastically impacts the ultimate consequence, he added.
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