Hello everyone and greetings to all the fellow steemians. I am good and enjoying my life and I hope that you all are also doing good and having a great time in your respected lives. Welcome to my yet another article in Steemit Crypto Academy and I am glad that you put aside your respected time to go through my post.

Yesterday I go through the lecture taught by our respected professor @fredquantum which is all about Crypto Assets Diversification (CAD) and here is my homework post in this regard, so let's begin with it without wasting much time;

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Question no 1

Explain Crypto Assets Diversification.

Crypto Assets Diversification

In the conventional financial world, overall quality of different commodities might fluctuate depending on marketplace circumstances. The technique of incorporating a range of crypto ventures to decrease hazards although one or even more problems happen horribly is known as diversification of one cryptocurrency approach. Diversification is a methodology for trading that includes various financial system. Diversification is one of the methods to limit potential losses as in crypto market. Some believe, however, than diversifying the cryptographic investment is unfeasible owing to the significant correlation between big cryptocurrencies and Bitcoin. As a result, numerous individuals are unsure that somehow this method could then be used for transfer the funds across different types of assets. The dealer may acquire a range of investments, according to Crypto Assets Diversification.


Markets may deformation in some kind of a variety of ways multiple moments each day, towards the profit as well as detriment to investors. As either a consequence, although it appears that volatility improves revenue, this even raises the chance on making a loss. It really is crucial to remember that just before selecting commodities for Crypto Assets Diversification, one must do thorough study whether financial market of something like the accounting estimate, trading volume, investor sentiment, usefulness, and management.


Market participants understand the need of diversifying their investments across types of investments so order to accomplish a favorable hazard ratio. As a result, several individuals are unsure that somehow this method could then be used to transfer funds across diversified portfolios.

Question no 2

What are the Benefits/effects of Diversifying one's assets?

Benefits of Diversifying assets

• An actual benefit of crypto diversifying is that it prevents overcorrection. Although one currency collapses while the capital plummets to zero, users may still be able to profit from several other symmetric encryption holdings. Crypto asset diversification like a trading method helps to keep financial assets stable. Like a result, consumers select a variety in cryptocurrency exchanges research.
  
  
• According to studies, managing a broad collection of currencies in one's investing portfolio boosts the general market earnings. By assets diversification, you have an unique opportunity to create more profit.
  
  
• Improves an industry's revenues. Any cryptocurrency has a revenue potential, therefore having these enables the currency beneficial at any given time. Investing in assets during a positive trend allows you to generate higher earnings than usual. Diversification ones personal strategy allows an operator to examine various components with in marketplace that really are functioning effectively.
  
  
• Any costs incurred will also be minimized when market patterns rapidly shift. Engaging into lesser initiatives and currencies that are essential to the distributed finance ecosystem is yet another option of earn from cryptocurrency's development.
  
  
• Investing in commodities during a positive trend makes it possible to create higher earnings than usual. Asset diversification can assist to mitigate or minimize threats. That's also valid since it is unlikely that all of the resources would be lost at the same time. Diversification causes the consumer to suffer a loss than if he would have just put all of his capital into a single asset which had already begun an uptrend.
  
  
  
  
  

Question no 3

Construct Crypto Assets Diversification according to the 1 - 4 Rule - Choose 4 crypto asset (State the reasons for choosing them), discuss each of the assets, and perform a detailed fundamental/technical analysis on them. Invest a part of at least 15 USD into each of the assets based on the diversification constructed earlier, proper stop loss and take profit levels must be put into place. A real trade on a centralized exchange is expected here. (Graphics/Screenshots/Charts are required). Note that: You are expected to show your verified account screenshot, your reservoir and the steps involved while investing (For example, if you are investing a part of 15 USD at a time, then, the reservoir must have been 60 USD clearly shown, you can use Fiat or Stablecoin for construction). Kindly take note.


The 1-4 rule is a key component of portfolio diversification, as taught in the course. This is accomplished by dividing the capital (reservoir) into four parts (pools) and investing 25% of the assets in each pool. I am choosing Bitcoin, Ethereum, trx, and grt for this illustration.
Below is the screenshot of my verified binance account and reservoir.

Bitcoin

Bitcoin was developed in 2009 by an anonymous developer Satoshi Nakamoto. is a peer-to-peer decentralized network in which nodes exchange digital currency. It was the first coin to develop in the crypto world and is also called King of cryptocurrency. Bitcoin is the parent of all the crypto coins which are developed till now. Its the only crypto coin which to have stayed up to a decade. Its trade activities affects every other alt coin which shows the dominance of bitcoin over other coins. The Bitcoin network has a proof-of-work (Pow) consensus algorithm, which means that miners earns bitcoins by solving complicated mathematical computations with high capacity computers.


I have chosen bitcoin for a variety of factors, including its popularity, its dominance which is now 42.33%, ranking, largest market cap, liquidity, and many others.

Screenshot taken from coinmarketcap


BTC is now trading at $48,282.06, with a market capitalization of $909,269,159,468 and a diluted market capitalization of $1,013,923,278,506 at the time of writing. In the last 24 hours, $32,057,469,285 has been traded. With a maximum supply of 21,000,000 BTC, Bitcoin has a circulating supply of 18,832,443.00 BTC.

Screenshot captured from Tradingview.com

Investing 15$ on bitcoin

Ethereum

Buterin Vitalik published the Ethereum white paper in 2013, but it was officially launched in 2015. It's a decentralized open source blockchain. With a market domination of 18.43, ethereum is the second most popular cryptocurrency behind bitcoin. Many other crypto currency are also affected by its trading activities due to its market dominance. Ethereum previously used the Proof-of-Work (PoW) consensus algorithm, but it has recently switched to Proof-of-Stake (PoS) .

Screenshot taken from coinmarketcap


ETH is now trading at $3,320.49, with a market capitalization of $391,029,003,082 and a diluted market capitalization of $391,029,003,082 at the time of writing. In the last 24 hours, $17,966,150,597 has been traded. Ethereum has a circulating supply of 117,762,418.69 ETH.

Screenshot captured from Tradingview.com

Investing 15$ on Ethereum

Trx

Tron (TRX) is an open source system which was launched in 2017. The founder of tron is Justin Sun. Tron also encourage smart contracts and decentralized app. Tron (trx) network uses Proof-of-stake (PoS) consensus algorithm. Its ecosystem has a high Transaction Per Seconds (TPS) pace, with over 2000 TPS, which is one of the reasons why it draws so many people.

Screenshot taken from coinmarketcap


Tron is now trading at $0.09413, with a market capitalization of $6,745,488,871 and a diluted market capitalization of $9,493,313,183 at the time of writing. In the last 24 hours, $1,039,479,497 has been traded. Tron has a circulating supply of 71.668 TRX.

Screenshot captured from Tradingview.com

Investing 15$ on TRX

Grt

The graph (grt) was launched in december 2020 and was founded by three persons namely Yaniv Tal, Jannis Pohlmann and Brandon Ramirez. It is an indexing protocol that enables the creation of fully decentralized applications. It also encourages smart contracts for decentralized applications.

Screenshot taken from coinmarketcap


The Graph (grt) is now trading at $0.7306, with a market capitalization of $3,445,100,287 and a diluted market capitalization of $7,347,216,327 at the time of writing. In the last 24 hours, $118,507,251 has been traded. Grt has a circulating supply of 4.728 TRXwith the maximum supply of 10,057,044,431.

Screenshot captured from Tradingview.com

Investing 15$ on GRT

Here is the screenshot of all the trading history, have a look at it also;

Question no 4

Explain Arbitrage Trading in Cryptocurrency and its benefits.

Arbitrage Trading in Cryptocurrency

Along with its earning management and the function it performs throughout the finance sector, this seems to be an often used word. Due to various variances in the values of contracts traded of cryptocurrencies upon that marketplace somewhere else on the marketplace values, arbitrage exists in crypto assets. Cryptocurrency arbitrage is a strategy in which traders buy a coin on one platform and immediately sell it on another for a greater price. There are approximately 200 exchangers with a wide pricing range among the conventional ones. They are supply and demand inequities, as well as asset pricing, which is completed independently with each exchange, so that you have larger exchanges driving the valuation with liquid assets, and smaller exchanges following them, but not always immediately sometimes the big ones change and the small ones are slow to catch up, which is where arbitrage opportunities exist.


Investors that use crypto arbitrage benefit from the fact that virtual currency sold for a lower price on one platform via buying and selling this for a higher price on another platform almost instantaneously. That form of trade and profiting has come pretty close to providing consumers such a reasonable profit, and nothing else has come close.

Benefits of Arbitrage Trading in Cryptocurrency

• When the program is effectively implemented, it provides the trader with a reasonably high amount of assured profit. In terms of revenue realization speed, cryptocurrency arbitrage surpasses many of the other trading strategies.
  
  
• It must be linked to extremely minimal risk is a measure of damages in Crypto assets. While you purchase at quite a cheaper rate then gain more profits, its assists the traders benefit.
  
  
• Arbitrage in cryptocurrency is a little less competitive than certain other, more frequently utilized investment products. It assists a dealer in avoiding loss since if a dealer purchases at quite a higher cost on the marketplace, he will undoubtedly make a loss.
  
  
• Investors earn money by creating revenues. This is particularly obvious mostly in Lending Prices arbitrage, when traders use the Long position. It is beneficial for a trader to be aware of several platforms as well as the rates that publish
  
  
  
  
  

Question no 5

Discuss with illustration how to take advantage of Exchange Arbitrage.


When a trader buys a coin at low price and sells same coin at high price in different exchange at the same time due to the liquidity and some exchange flow activities, then this phenomenon is known as exchange arbitrage. Exchange arbitrage is a sort of arbitrage trading in which a trader profits on price differences between exchanges.


Different exchanges might provide different prices for the same asset. If the price of ethereum on one exchange is 3100 dollars and the price of ethereum on another exchange is 3115 dollars, an exchange arbitrage trade may be made by purchasing ethereum from the first platform and then selling it on the other. As a result, the trader would have a profit of $15.


For practical demonstration I'll compare the price of BTCUSDT on the Binance and Bittrex exchanges to show how arbitrage trading works. As you can see in the screenshot below, if I buy 1 bitcoin on the Binance exchange, I will have to spend 47,137 dollars, and if I move it to the Bittrex exchange and sell it there, I will receive 47,165 dollars. As a result, a profit of $28 would be generated. This is an excellent illustration of arbitrage trading.

Binance Exchange

Bittrex Exchange

Question no 6

Creatively discuss Triangular Arbitrage in Cryptocurrency. How to identify Triangular Arbitrage opportunities and the risks involved.


The trading approach that relies on a marketplace discrepancy between three different currencies exchanged on the very same system is known as triangular arbitrage. Triangular Arbitrage, also known as currency swap arbitrage, seems to be a type of arbitrage which happens whenever the prices of three assets vary. The triangle arbitrage may be carried out on a single trading platform which must include at least three distinct assets with differing pricing. These have frequently been done throughout the financial markets, and that it can be done there in cryptocurrency industry as well.


Mispricing between three pairs of coins can be exploited. If you have ETH/BTC, ETH/LTC, and LTC/BTC, you'll see that they form a ring or triangle. Because the currencies are denoted in USD values on traded marketplaces, you can benefit from arbitrage. For example, Ethereum converted to Bitcoin and Litecoin converted to Bitcoin are two independent markets with different supply and demand, which is why there are price disparities, which you may profit from by going through the pairings to acquire that price disparity in terms of USD value.



Source

Identifying Triangular Arbitrage Opportunity

For identifying triangular arbitrage opportunity, Identify a situation in which one currency is discounted or overpriced for another. Assess and compute the charges, as each commodity, as well as the platforms, has its own set of charges. Examine the various currency pairings including currency values. That once strategy is effectively completed, it provides the trader with a reasonably high amount of assured profits. Regarding arbitrage trading, there seem to be programs or algorithms that can help you locate or manage such chances.

Involvement of Risk

Inside the implementation of the action, the value might deteriorate, leading to a loss. Excessive charges and gas extraction are two possibilities. Whenever potential chances really aren't taken advantage about before the transfer deadline, investors may find themselves in potentially adverse situation. Since it's difficult to somehow get into and around exchanges and networks due to a lack of availability. That cryptocurrency industry's explosive growth can have a detrimental impact on triangle arbitrage in a couple of moments or minutes.

Conclusion

The tremendous volatility of the crypto market mandates the employment of sophisticated risk management measures. As shown in this article, one of these strategies demands a flexible approach to money management. When done correctly, a diversified portfolio can be an excellent risk-mitigation approach for crypto investments.


Arbitage trading is a strategy for identifying market inefficiencies that result in price disparities between different trading pairs and exchanges and profiting from them. To sustain profitability and avoid limits such as slippages, this trading method necessitates trading experience and quick trade executions.

Professor @fredquantum, thank you for your fantastic and useful lesson. This lesson taught me a lot, and I'm looking forward to hearing more excellent lectures from you:)


Regards: @dabeerahmed