Late Friday Night Chart Studies
As I was going through charts, coins and projects on Friday evening I noticed something very interesting as I was checking out the price action on some of the BULL tokens available on FTX. These are FTX leveraged tokens but are also available on BitMax.
The BULL and BEAR tokens are 3X leveraged to the daily price action of the particular asset or index. The DeFi index is particularly interesting and can be traded as a perpetual futures contract or as a 3X BULL or BEAR token. For the more risk averse, the DeFi token can be traded on 1X leverage as a perpetual futures contract, thus minimizing risk. What makes the DeFi token so interesting is that it is a way of gaining exposure to top DeFi projects namely,
As you can see, these are amazing projects and probably have the strongest footing in the DeFi space as they have been gaining strong adoption and investors over time and not just recently with the DeFi boom! Before Defi was the new buzz, we all knew of and respected projects such as Loopring, Kyber Network and Kava.
The Slightly Safer DeFi Play
The majority of the projects in this index have been around and proven themselves over time. The only relatively new project is Compound, so the risk associated with holding this index is fairly low when you consider the risks associated with a lot of the other DeFi projects.
As I mentioned in an earlier post this, this is a far safer way of being exposed to DeFi compared to holding a few riskier tokens. If DeFi continues to trend and gain further adoption and users then this index will definitely appreciate in value.
However, if DeFi were to collapse or experience a bear market then this index would not drop as hard as a lot of the other DeFi plays around at the moment. Look at LEND which is now in the TOP 30, Compound is in at number 35 and ZRX is at number 45! It is clear to see that many of these projects are fast becoming Top tier, thus creating more price stability in times of distress. Yes, all alts drop when the sentiment turns negative but your larger caps are generally not as volatile as small caps and that will always be the case.
Buying 3X BULL tokens at the right time is highly profitable, while buying at the wrong time can lead to sharp losses. The above screenshot of the DeFi BULL token reveals that leveraged losses have provided current entry points at the same price prior to the DeFi craze. In essence, the opportunity has been recreated by this investment vehicle, provided we see a further rise from here.
If BTC does not drop further from this point and there is a fair of amount positive sentiment in DeFi then this would be a great time to pick up some DeFi BULL tokens. A more conservative approach would be to trade the PERP contract on 1X and add to the position over time, minimizing risk. Trading these instruments requires trading experience and understanding of how the tokens operate. Please do not consider this as an option if you do not meet the above criteria.
Always do your own research and do not consume any information here as investment advice.