The digital asset market is a dynamic arena. If you’re a seasoned investor, you are likely familiar with the fundamentals of buying and selling.
Let’s break down these strategies for savvy investors like yourself.
Leverage: Amplifying Your Buying Power
Imagine having more cash to buy an asset you believe in. Leverage allows you to do just that. By borrowing funds from your exchange, you can control a larger position than your initial investment allows. Let’s say you have $1,000, and Bitcoin is trading at $10,000. With a 5x leverage, you could control $5,000 worth of Bitcoin (essentially buying 0.5 Bitcoin).
Here’s the exciting part: if Bitcoin increases to $12,000, you’d make a 20% profit on your $1,000 investment (because 0.5 x $2,000 = $1,000). That’s significantly more than the 10% profit you’d make without leverage.
However, leverage is a double-edged sword. If Bitcoin falls to $8,000, you will experience a 20% loss on your investment, potentially wiping you out entirely if the exchange requires you to add more funds (known as a margin call). So, leverage is best used cautiously and with a clear understanding of market risks.
Crypto derivatives: Trading on Price Movements
Crypto derivatives are contracts that derive their value from an underlying asset, like Bitcoin. Unlike directly buying Bitcoin, crypto derivatives allow you to speculate on its crypto future price movements. Here are two common types:
- Futures contracts:These are agreements to buy or sell an asset at a specific price on a predetermined date. You can profit if you correctly predict the price movement.
- Options contracts:These give you the right, but not the obligation, to buy or sell an asset at a certain price by a certain time. They offer more flexibility than crypto futures contracts but can be more complex.
Crypto derivatives can be powerful tools for experienced traders. They allow you to hedge existing positions, profit from falling prices (shorting), and magnify gains (leveraged options). However, they require a deep understanding of financial markets and carry significant risks.
The Takeaway
In an ever-evolving market, staying updated on digital assets, cryptocurrencies, and real-world assets is crucial for making informed decisions. At Kenson Investments, we provide you with in-depth insights, comprehensive analyses, and educational resources to enhance your understanding. By joining our community, you’ll gain access to the latest trends and developments, ensuring you’re well-prepared to navigate this dynamic landscape. Connect with us today and empower yourself with the knowledge you need to stay ahead in the world of digital assets.
Disclaimer: The information provided on this page is for educational and informational purposes only and should not be construed as financial advice. Crypto currency assets involve inherent risks, and past performance is not indicative of future results. Always conduct thorough research and consult with a qualified financial advisor before making investment decisions.
“The crypto currency and digital asset space is an emerging asset class that has not yet been regulated by the SEC and US Federal Government. None of the information provided by Kenson LLC should be considered as financial investment advice. Please consult your Registered Financial Advisor for guidance. Kenson LLC does not offer any products regulated by the SEC including, equities, registered securities, ETFs, stocks, bonds, or equivalents”
