The crypto industry has been on the rise again, the latest in a series of smaller dips and larger growth periods. Compared to nearly any other industry, the value created within the crypto ecosystem has been nothing short of incredible, and with enough bear/bull cycles to show that it can self-regulate and prevent large bubbles from crashing the market.
With this positive outlook, one might take this to mean that you can jump into crypto with little risk. Unfortunately, this just isn’t the case. In fact, a startling 90% of crypto traders are currently losing money. This statistic is incredibly sobering, and makes you wonder how the market is doing so well with so many people playing it wrong.
As interesting as this fact is, there is one that might be even more curious: According to many sources, around 90% of traditional traders lose money in the stock market. The numbers are the same, and many of the reasons are the same. The fact that crypto is new, or more volatile than traditional markets doesn’t seem to matter. If you get into trading and don’t have the right tools, such as a hedging platform to manage risk, you are likely to walk away poorer than when you started. A key tool for this is hedging; while there are many hedging options in TradFi, there are few solid options in crypto, most notably Umoja’s recently launched beta.
So what are the key reasons for this lost wealth? The lists differ, but key reasons include trying to pick individual stocks/tokens, relying on timing instead of longer term investments, losing patience and not having a strong psychological mindset for your strategy, or not having a strategy based on solid education/experience. Speculation, hot tips, and even “experts” you know with inside tips don’t seem to help much. Instead, it’s important to find solid investments and be ready to hold on for the right amount of time. For traditional markets this strategy is more standardized and predictable. For the crypto market, that volatility can be daunting, and if mistakes (or bad luck) hit hard enough, it can mean the loss of your balance.
Hedging Brings Balance
While some of the more “risk-tolerant” traders out there might view hedging as a boring way to lessen the impact of a big win (looking at you, Degens), the fact is that everyone in the crypto world should be hedging, even if it’s a small piece of the overall portfolio. The traditional market can move and shake, but the crypto market can have moments of unexpected volatility, and stable picks can have wild dips based on rumors, platform performance, or for no great reason at all. Hedging helps to balance that risk, and helps to prevent major swings from wiping you out. The bottom line is, hedging helps you to be a long term trader.
Hedging, be it in TradFi or crypto, is a risk management strategy that involves taking an offsetting position that can lower negative impacts from unexpected price movements. It is a powerful, stable tool to protect against market uncertainties (a common part of crypto prices), helping to soften any losses that might occur.
Improved Hedging Options for All Traders
Where crypto differs from TradFi is in its ability to find true innovation, quickly. Hedging has become an even stronger option with the recent launch of the Umoja beta platform that allows several unique hedging tools.
Umoja offers the ability to customize a hedge depending on the position and risk appetite, but does so in a way that allows users to maximize their yield farming and staking, earning rewards while still taking a hedge against unexpected market movement and dips. Most notably, the platform offers zero-loss staking. This allows its members to stake on popular assets such as BTC, ETH, and others, while maintaining a position that will protect the notional investment. This is a true game changer for traders of all experience levels, helping them to stay away from the “90% stigma” of trading, and helping to maintain a risk profile better aligned to long term growth.
With volatile markets in the crypto ecosystem, trading can still be profitable but it is necessary to manage risk well. A key way to accomplish this is through hedging, and traders can explore elements such as zero-loss staking through Umoja’s new beta.
It’s About Healthy Risk Management
Whether it’s TradFi or crypto, a solid portfolio relies on managing risk well. Making safe bets is a part of it, but making bold moves can be a strong strategy as well. However, bold moves should always be offset by a proper hedge, and with new crypto options launching for hedging strategies, traders of all skill levels can start learning the process and placing a hedge strategy as a key part of their long term growth.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.