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Real risk of serious bear market: Portfolio protection tips.

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Written by   33
1 month ago

There are many warning signs we are very late in the current growth cycle of the BTC price and we could soon be about to enter into a steep bear market.

The current BTC chart looks very similar to the late phases of an  economic bubble as first defined by Charles P. Kindleberger.

At this point in time, those with significant exposure to BTC or correlating assets who would like to avoid large fluctuations should be watching out for price breaking under the $44,000 level. This could be the last opportunity to take actions to prevent further losses.

If there is another breakout instead of a rally into new highs, we'll be completing the "Neck break" of a head and shoulders pattern.

Tips for a bear market.

1 - Options. At this time someone with a lot of exposure to a bear market could buy some put options on assets they own. I can't go into specifics on this. Because the options market in crypto is still pretty under-developed I've not gotten involved enough in it yet for that.

What I can say though is right now the OTM put options are probably pretty reasonably priced even if you were buying them for 6 months out. They'd probably pay out somewhere between 30 and 50 * what was put into them in the event of a big bear market. This gives a portfolio insurance cost of 2%.

2 - Futures. Futures trading is a bit harder than options because with an option you just have to buy the option and wait. Futures can require a bit more effort. But this is where I can get more specific information which I hope can be of some use, should it be needed.

The simplest trade is to place a pending order (A sell stop order) at 39,000. Place a stop loss on this trade over the high and then place a take profit around $16,000. This trade will pay off 1:3 what you risk on it. This is the lowest risk trade (By risk here I mean chances of you getting stopped out the short but there still being a bear market).

There will be times where more aggressive futures trades can be taken that can have 20, 30 and 50* pay offs but these will be higher risk. You'll have to use tight stop losses and might get stopped out before the market falls. This is very hard. To get 1:3 - 1:7 is much easier and is probably better for you to target, unless experienced.

3 - Leave that knife alone! When the bear market starts, accept we're in a bear market. Do not buy when there have been big rallies, good news or flashes of bullish optimism. You'll keep on buying into the highs of moves. These are known as "Sucker rallies".

If you want to increase your position when the market is cheaper than it is today, do it when the market is falling and do not buy when the market is rising. You'll get a far better dollar average. Although I'd say the best bet if big selling starts is just to wait, wait and wait. After a while, the crowd will be gone. Again.

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Written by   33
1 month ago
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Comments

Very nice

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2 weeks ago

I am agree with u

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2 weeks ago

Thank you for your advice 👍

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3 weeks ago

İyi fikir katılıyorum

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3 weeks ago

Nice write

$ 0.00
1 month ago

Nice

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1 month ago

Very informative article! As a fairly new investor to this market place, this info can be used to put my whole portfolio in perspective and requires more learning!

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1 month ago

This asset class has a lot of potential but as with everything subject to economic speculation there will be cycles and we're very late into one now. So this is a time for caution. Better opportunities will be ahead.

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1 month ago

Well, actually, with fundamental analysis the february-march period of every year plays a crucial time to the bullish and bearish flow of the market. I love the analysis and this is the truth - the big risk of crypto market. Is it alright if I share the link of your post on noise? Just to inform people about this?

Honestly, with all the fuzz happening around, investors and those people who's planning to invest should be vigilant.

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1 month ago

Yes. You can share my analysis as you please. I want it to help people.

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1 month ago

Today's price is 50,088.

Big warning sign if we go under $44,000.

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1 month ago

I am waiting currently. I mean, I made profit already which was right after years of struggle. I joined in 2017 and understand a lot today about the market sentiment. I also understand that prices can rise further and make new all time highs. However, I admit it can crash any time. We can wake up one day and see 40% lower, a bounce and more down then for years. I see that we are close to the end of this bull run. Maybe a few more months but it won't last forever. The calcurated risk is too high for me right now.

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1 month ago

There is more liquidity in the market now for BTC so any crashes might be slower rather than huge one day crashes (But who knows). This will make a crash less sever but it will also make it take longer. Something bulls should be aware of.

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1 month ago

Nice post

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1 month ago

You have all the options you need (and futures) on Bit.com

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1 month ago

I'm waiting on the liquidity of crypto options to get a bit deeper. I am a bit options seller and when selling options it's pretty important for the market to be really developed to avoid too much risk. I don't think it's quite there yet. But this is not a concern if people want to just buy protective puts.

I have a few brokers for futures.

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1 month ago