A lot of folks seem to be annoyed by the magnitude of the retracements in the crypto space, citing whales as main culprits. But the truth is, that even though we feel crypto retracements as strong movements, they are actually pretty regular retracements. Most retracements fall into the 38.2% to 78.6% Fibonacci ratios with the odd ones going further than that, but in those cases, we can often find a plausible justification for it.
So how can you beat whales at their own game? How the hell can you not only reduce exposure during a retracement, but profit from it? The answer lies in 'Contracts For Difference' commonly refereed to, as CFD's. These are financial instruments that are pegged to an underlying asset, for this example, it could be Bitcoin. And at any given time you may enter a sell-short position which will allow you to profit as the price drops.
There are many new traders in this space, and I think this is a great piece of advice as it not only will allow you to survive the dips, but it will allow you to make some extra money to re-enter the market. However, I do not recommend new traders to venture into leveraged trading, also known as margin trading. I see plenty of new people in the crypto space trading on margin with very limited tools and experience. GDAX's flash crash surely must have been a warning for many. If you've been trading cryptos since 3 years ago it may seem like you're experienced enough for margin trading, and I don't doubt there's confidence and arrogance abound, after all, that's expected when you get really long streaks of being right. But trust me, after trading various instruments for the past decade I can safely say that the crypto market is like the Nordschleife track. Just as that track has every kind of turn, so does the crypto space, and so all it takes, is a little gap in your trading education that will prevent you from doing the right decision once that exotic turn comes across. An example of that was the current Ethereum price. Many traders felt Ethereum couldn't bounce as it did today because of the time we've been retracing (14 days). Ethereum simulated that was continuing the uptrend around the 20th Jun, at which points various popular newbie youtube crypto traders were frantically advising their followers to buy, and yet, we were met with a further decline of $150, and yet recently people were turning bearish at the exact moment we had a respectable bounce registering a nearly $100 gain.
I'm unaware of any exchanges of the likes of Poloniex, GDAX, Bittrex that allow short-selling, but I wouldn't be surprised if they existed. But even though these are seen as the most reliable exchanges, I've always looked for something safer to do hedging and I can safely recommend eToro as a regulated broker that will allow you to buy and sell Bitcoin and Ethereum. They seem to have added a couple more very recently but I think they aren't active yet, these are: Litecoin, Ethereum Classic, Dash, Ripple. Have in mind you are not trading the actual tokens as you trade them in crypto exchanges. This may pose a few challenges and benefits depending on what your requirements are. Firstly, you cannot ask to withdraw cryptos into a wallet. The trades always revert back to fiat and that can be a good thing if you want to get into fiat fast during a crypto downturn. It also may allow you to invest your money somewhere else like NVIDIA or NASDAQ in the event of a major crypto downturn so instead of having some money stopped, if there's something else that's interesting at that time you can certainly make the most of it, even if it is for a measly 1% profit.
Don't expect many advanced tools and charting from eToro, but they certainly have a well established record and are reputable. They are often found in reputable news sites like Bloomberg and their CEO is a well known figure in the financial scene. I've seen eToro grow back from when it started and it was the very first place where I've started trading cryptos before venturing into "physical cryptos" let's put it that way.
Happy Hedging!
