Crypto & MMA Enthusiast. #freshgraphics #topbitcoinbeliever 👻👽
The most recent price correction within markets has had the crypto community feeling very anxious recently, and rightfully so, with $20 billion wiped off the market capitalization over the course of the past week. However, despite these losses, current market circumstances can provide seasoned traders to realize profits through these downturns. Using Huobi Global’s margin trade function, more specifically via BTC long trading, I was able to accumulate healthy profits during the dips.
‘The crypto markets seem to hit panic mode’, would be a very apt summarization of the most recent downturn. With over $19 billion wiped off the market capitalization in under 24 hours, investors abruptly initiated mass sell-offs plunging the markets to yearly lows. At the lowest point, total market cap fell below $200 billion, for the first time in 2018, the lowest figure since November. Bitcoin dropped below $6000 while Ethereum and Ripple were among the hardest hit as the price of Eth dropped nearly 18% overnight, recording new lows not seen since August 2017, trading at $264. Ripple likewise set a new yearly low, dropping 14% to trade at $0.26.
While it is difficult to state specific reasons for this market downturn, a combination of various news and factors have contributed to the selloff. Samson Mow, chief strategy officer Blockstream Corp, stated,
‘Most cryptocurrencies have been overvalued for a very long time…it’s the opposite of last year, instead of FOMO; people are piling out as they sense panic.’
Back in June when the market rallied, specifically Bitcoin on the hopes that a Bitcoin backed ETF would be approved. However, the SEC has yet to sign off on such events and this had coincided with the increasing concern that ICO projects who raised funds predominantly in Eth are now liquidating the currency for crypto projects. The markets 70% low from the January highs is reflective of investor’s frustration over incremental inroads into commerce and a general stagnation in speculative investments.
While many would say trying to predict the crypto markets is a fool’s errand, the ferocity of recent price movement should naturally lead to an upturn in prices. With many of the altcoins having dropped in excess of 50%, a small surge in markets is somewhat to be expected. The corrective rally, however, has no definitive length and might not be as strong as investors hope. Despite the yearly lows many currencies have reached, the current prices don’t seem to be warranting such lows. There is a general sentiment that adoption is stagnating somewhat and more obviously there is a strong reliance and almost expectation that a Bitcoin ETF will be approved. However, despite the rejection of the Winklevoss ETF, which was expected, markets continued to bleed. This was even more puzzling as some the best crypto-related news has been released over this time period, such as ICE, the owner of the NYSE has been working on a Bitcoin platform and further regulatory progression in countries such as South Korea and the UK.
Long Trade: This is the trading strategy where traders will buy an asset/share/currency and hope the price will go up, as they will be going ‘long’. For example, if I go long on 100 shares of ABC stock at $10, the transaction will cost me $1000. If I’m able to sell the shares at $10.50, I will receive $1050 and a net profit of $50, minus any trading expenses. This would be the ideal scenario for a long trade. Alternatively, if ABC stock price drops to $9.50 and receives back $950 on the $1000 trade, I lose $50 plus any trading costs.
Most recently towards the end of June to Early July, there was a price rally within the markets. Total market cap increased by over $45 billion, from $235 billion to $280 billion.
It was during this upturn I was able to go longing with Huobi and execute some BTC long trades.
1. On June 29th using margin trading, I loaned $2000 worth of USDT to go long on BTC, placing the order via Huobi Global.
2. The order was placed at when BTC was around $5800.
3. I then set my limit order to 100% of funds at $6600.
4. As soon as the BTC price reached $6600 on July 2nd, my long order was executed and all my funds sold.
5. So from this if I do the calculation:
2000/5840 = 0.342465
$2260.3–0.3% (marginal rate of interest)
So as shown, I was able to earn a healthy profit via my BTC long strategy. Please remember that I was able to loan $2000USDT for the BTC purchase as I was prepared to lose that investment, should the price go short instead of long. Only invest as the old adage goes what you can afford to lose.
Readers of this article, interested in better positioning themselves for a possible rebound in crypto prices, have the options of doing so. When trying to achieve the most beneficial foundations for a potential price surge, readers should:
While a large dip in prices, especially over a very short term, will often lead to a corrective rally, this doesn’t always correlate. Examine previous losses and see how the recovery played out. Also pay particular attention to any significant news, which could have either a positive or negative effect; especially in the current market where a slight sentiment, either way, tends to result in fairly major moves in the market.
While this may be difficult, especially in a severe flash downturn, keeping funds ready for events such as the losses we are experiencing is always advisable. Due to the highly volatile nature of crypto, keeping accessible funds for both long and short scenarios would be advantageous. Now, margin traders might be happy to borrow, but in any case, investing what you can afford is key.
While it may be tempting to go long on a large position, particularly when the majority of altcoins are hitting new record lows, however, this instinct needs to be kept in check. Consider a buying position, a half or even less, of your normal investment amount. Keep focused on current news and information and by starting with a smaller position, will help reduce exposure to bigger losses if you placed the order a little early.
Margin Trading means leveraging your position to purchase stock or currencies. It’s similar to that of a loan from the exchange. It allows traders to purchase more currencies that they would’ve been able to normally.
Margin trading is available to the existence of the lending market. In our scenario, the lender will be the exchanges and they will provide loans to traders, providing them with the ability to invest in larger amounts of coins. The benefit to the exchange is the interest on these loans.
Buying on margin is an illustration of applying leverage to maximize potential profits in the case of a price rise. As an example:
The reader thinks the price of a coin, say Mooncoin, currently valued at $20 will increase in value. They want to buy 100 shares but only have $1000. If the reader insists on buying the full 100 shares, instead of the 50 they are able to afford, the reader can borrow the extra from the exchange, say Huobi Global, on margin. If the price rises, in line with the expectation of the reader this is the best outcome. If Mooncoin goes to $30 per coin, their investment will be worth $3000, and the margin loan will be liable for $1000. If the portfolio is sold, the total amount will pay the loan and leave the reader with $2000. By using margin trading the reader has double their money.
Leverage, when used correctly can provide substantial profits for the trader. But it must be acknowledged that it is still debt, so please be aware that the outstanding amount will need to be cleared eventually 🤘
Disclaimer: Please only take this information as my OWN opinion and should not be regarded as financial advise in any situation. Please remember to DYOR before making any decisions 🤓
♂️ Hi, my name’s Sal.
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