Bitcoin Faces Further Losses, Time To Hedge Against Risks?
On Thursday, the yield of the 10-year note jumped to a new high of 1.6%, sparking fears of inflation and rising borrowing costs. In the U.S., software companies, electric-vehicle companies and cryptocurrencies took the biggest hit. The tech-heavy Nasdaq dropped as much as 3.5%, a figure not seen since October, and the S&P declined 2.5%. Cryptocurrencies continue to slide with Bitcoin testing its $45,000 support. China’s stock market has been closing low for five consecutive days after the Spring Festival holiday, reversing its gain before the week of the festival. Fears for inflation and overvaluation are major reasons behind the decline.
Despite Bitcoin dropping over 10000 points, institutional investors see this as an opportunity to buy more Bitcoin. Square announced that it purchased about 3,318 Bitcoins at an average price of $51,236. Now the company owns about 8,000 Bitcoins. MicroStrategy also announces that it plans to purchase $1 billion more BTC by issuing convertible senior notes.
Meanwhile, an indicator called tether premium suggests that Chinese traders take this as an opportunity to accumulate more Bitcoin at lower prices. “Chinese investors, especially those with very little bitcoin exposure, are now looking for channels to buy bitcoin. And buying bitcoin through USDT is the most direct channel, which led to an increased demand for USDT in the [over-the-counter] market,” said Flex Yang, founder and CEO of Babel Finance.
Although Federal Reserve Chair Jay Powell commented that the Fed will continue its policy of keeping interest rates ultra-low, investors respond by fleeing the markets.
While Powell’s speech and the possibility of a $1.9 trillion stimulus package offer hope for the recovery of Bitcoin, Bitcoin needs some real boost to overcome several hurdles before resuming its bull run. A TradingShot study suggests that Bitcoin could retrace to the $35,000-40,000 area before making a bounce back.
Hedge loss and earn profits with futures trading
In futures trading, traders can short or long cryptos and increase their exposure by using leverage. Every fluctuation is an opportunity to generate profit. It’s perfectly normal for traders to achieve 100% ROI or more.
Let's see how:
Step 1: the current price of BTC is $31,000. If you believe the price is going to drop, you can open a short position with 0.01 BTC. Now, 0.01 BTC may not seem much, but with 100x leverage, you can open a contract worth 1 BTC.
Step 2: When the price of BTC drops to $30,000, you close the position.
Profit: ($31,000-$30,000)*1 BTC/$30,000=0.033 BTC.
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Another way to hedge against risks is to earn passive income with the Bexplus wallet. The wallet offers up to 21% annualized interest and the deposits could be withdrawn at any time. The wallet is independent from the trading account so the deposits will not be used as margin.
Demo Account with 10 BTC
What better way to improve your skills than practicing in the simulator. There are 10 replenishable BTC in the demo account for traders to practice as much as they like, without taking any risks. You can also learn to analyze the market and use the tool-kit with the demo account.
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You can submit a withdrawal request anytime you want. You can have your deposits back in as fast as 1 hour during work hours. If you encounter any problems when using Bexplus, you can contact customer support via different channels, such as e-mail and live chat. Meanwhile, if you want to improve your trading skills, Bexplus analysts are always ready to help.
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