MoneyByte Hedging
Explanation about Hedging
A hedging transaction is a position that a market participant takes in order to limit risks related to another position or transaction that the market participant is involved in. Hedging transactions are a common tool for businesses as well as portfolio managers looking to lower their overall portfolio risk.
What is the correlation between the major crypto and altcoins?
Many believe that when BTC rises, their altcoins will fall in value. Holders of altcoins are more tempted to sell their altcoins during large BTC price increases and other major Cryptocurrencies. When BTC peaks or holds steady, that's when you'll see investment return on altcoins.
How by using MON you may be able to spread the risk?
MoneyByte aims to provide steady returns. But, if major Cryptocurrencies increase rapidly, we can experience periods of volatility.
If you're considering making a little profit (and there's nothing wrong with that!) you may want to consider hedging with MON.
Instead of selling, consider staking some of your MON against the rising price of the major cryptocurrencies.
For example, if BTC Rises, so to does the quantity of MON you've invested. As with all hedging, if BTC falls, so will the MON reward you'd receive back.
If you believe in the correlation effect described above, while you would have less MON, that MON will have a higher value.
The performance of this hedge is linked to % movement either way, up or down. Of course there are others that use hedging as purely speculative tools, which can be useful in a portfolio.