Hedge your Bitcoins with SBD and cover your losses

chitty (69)in #bitcoin • 8 years ago (edited)

Today we have seen an announcement from the Bank of China stating that they will carry out onsite inspections on major Chinese exchanges. The first one being BTCC, who tried to calm their customers on their twitter page and explained:

“A group of regulators consisting of the SH branch of PBOC, the SH Financial Affairs office & other related govt agencies visited BTCC.”

“During this visit, we followed up on prior discussions and shared details about our business model and operations with the group.”

“We expect to continue with additional meetings later this week.”

“All operations at BTCC are normal and we continue to actively work with regulators to ensure that we remain compliant.”

“In the meantime, we urge our customers to take a rational & cautious view to news articles which speculate on the visit and discussions.”

@YourBTCC

However, speculations of what could happen to BTCC and other chinese exchanges, who account for a large percentage of the total BTC trading volume, has resulted in a large sell-off that has tanked the price more than 10% in the last 24 hours alone.

How to prevent losing money during a BTC crash?

As people cover possible BTC losses they look for assets to hedge their funds with, FIAT is of course the first option but we all know it could up to a week to convert BTC to FIAT and have it available on your bank account.

So what about other stable cryptocurrencies? well most coins today are in red, but SBD has held its usd-peg like a true champion. It is up 10% today, the same percentage BTC has fallen.

The basic principle of hedging is to exchange a stable asset for another that is losing its value. In this case you can use BTC to buy SBD until the Chinese storm settles, thus maintaining your overall net worth.

The one thing you need to look out for is liquidity, you do not want to buy SBD on the way up and there is little SBD on the sell books. So my recommendation is to buy in small portions and buy other stable assets as well. BitUSD, BitSilver and BitGold are also good stable currencies that you can buy on the Bitshares platform. If you prefer a centralized non-crypto platform you could also try GoldMoney and buy some real Gold.

Remember that cryptocurrencies are very volatile, so you should always have a diversified portfolio and hedge your assets when there are steep declines in Bitcoin´s price.

@chitty