Markets Correct Even In Bull Markets
Perhaps you think that the end of the Crypto winter signals smooth sailing for the next two years, that prices will just steadily climb and your portfolio will start to blossom. True, if you are a hodler, for the most part it will but 30% to 50% corrections in a bull market are quite normal and to be expected. I wonder how many weak hands will give way during these times?
If you are a derivatives trader then these drops can be absolutely devastating! Liquidations run wild on derivatives platforms like Bitmex and Bybit, as optimistic euphoria leads many to the slaughterhouse. If you have never traded on leverage before then I suggest avoiding it all together, otherwise gain as much experience and knowledge as possible and use very very low leverage.
For me, I have developed a strategy over many years that has worked very well for me for a while now but that is not what I am going to be talking about. The strategy that I am addressing in this post will incorporate leverage without the liquidation risk.
The Bull & Bear Tokens
One of my favorite exchanges is FTX and they have an entire portfolio of leveraged tokens, which work on a 3X leverage. In other words the BTC BULL token tracks the price of BTC at 3X the daily movements. This means that if BTC increases by 10% on the day then the BTC BULL token will increase by 30% in value. Likewise, if it drops by 10% then the BTC BULL token will also drop by 30%!
From what I understand, a liquidation is highly unlikely as the tokens recalibrate every 24 hours, meaning that the value of the tokens just increase or decrease significantly. Below is a screenshot of the ETH BULL token on the daily chart. From approximately $200 in July to as high as $1200 in mid August.
I plan to make use of the BTC BULL and ETH BULL tokens when the market dips by 30% or 50% during sharp corrections. Trust me, these corrections will come! These dips tend to get bought up really fast and before you know it you have surpassed the point at which the sell-off triggered. I saw it over and over in 2016 and 2017!
I will be buying BULL tokens on all the dips to create some nice multiplication. At this stage I am only looking at utilizing BTC and ETH BULL tokens but we will see how it goes.
This is definitely not financial advice and only my own personal approach to the market. If you do choose to make use of leveraged tokens, please ensure you have a full and complete understanding of how they work. Always do your own research.