The past few weeks and months have brought carnage to the crypto markets. That's undeniable. Bitcoin is down more than 50% from its all-time highs, while ETH has bombed by almost 60%. And just when crypto investors thought they could at least rely on stablecoins to protect their digital wealth, we saw a totally unpredictable catastrophe hit UST (Terra) and DEI (Deus). Even the sector leader, Tether, has lost nearly 10% in the span of a week. You could be forgiven for thinking that this marks the beginning of an intractable bear market for digital assets, but haven't we been here before?
Circle of life
It may have seemed as if cryptocurrencies' extreme volatility was a thing of the past. After all, we were in a seemingly endless bull market, institutional investors were finally getting on board en masse, and ancillary markets like DeFi and NFTs were expanding at a rapid rate. However, this wouldn't be the first time we've seen leading digital currencies lose over 50% of their value. Everyone remembers 2018, but what about 2013 (-83%), 2012 (-56%) and 2011 (-99%)? The fact that the last major crash was a whole 4 years ago should really be taken as an optimistic sign for the future. At the end of the day, all asset classes are vulnerable to major drawdowns of 50% or more. Ups and downs are an inevitable part of every market's life cycle. As long as they aren't too frequent and remain relatively short-lived, we shouldn't be overly concerned.
While passive investors and HODLers can take solace in the idea that crypto may have a very bright future ahead of it, active traders may wish to benefit on the way down as well as from the eventual recovery. They can potentially do so by buying the dip and investing regularly throughout the downtrend, thus reducing the average price paid and possibly maximising their potential percentage gain over time. Another solid bear market strategy is staking, which involves locking crypto into the blockchain for a period of time, generating a passive income. Indeed, following the demise of Terra, stablecoin staking yields have risen as high as 40% (USDD). But for those looking for the biggest risk-to-reward ratio available, shorting is by far the most potentially lucrative option. You can do this via options or futures, but have you ever thought about an interesting alternative way through Contracts for Difference (CFDs)?
So, what are CFDs?
CFDs or Contracts for Difference are unique financial products that allow you to trade on changes in the price of a given underlying asset without having to physically own the said asset. Best of all, this means you can just as sell an underlying asset as buy it. As a consequence, you need not worry about finding a physical buyer or crypto transaction speeds. As soon as you close out your position, the price you receive is guaranteed. There are many CFD providers out there, but Libertex has been recognised on multiple occasions as one of the most awarded and client-focused brokers on the market.
Apart from the annual awards and industry accolades, Libertex is renowned as a broker that puts its customers first. And because Libertex offers CFDs in a range of different underlying assets from virtually every asset class imaginable, users are able to store their entire holdings in one easy-access location. In fact, Libertex clients can maintain a diversified portfolio of CFDs on stocks, indices, gold and, yes, crypto – all in a single account.
If all that wasn't enough, Libertex even offers zero commission fees on all cryptocurrency CFDs, no swaps and exchange fees you’ll have to pay. All you'll be asked to pay is the spread (the difference between the Bid and Ask prices). Nothing more.
Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 70.8% of retail investor accounts lose money when trading CFDs with this provider. Tight spreads apply. Please check our spreads in the platform. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Cryptocurrency instruments are not available to retail clients in the UK.
Available for retail clients on the Libertex Trading Platform.