Crypto Investments in a Bear Market: Addressing the Elephant in the Room Comments Off on Crypto Investments in a Bear Market: Addressing the Elephant in the Room 5659

Should you sell all of your crypto?

That’s the question many investors have been asking since it was announced that crypto is in a bear market. Simply put, a bear market happens when stock value rapidly declines by 20% or more. This is occurring across all markets, not just crypto, because of high rates of inflation, increasing interest rates, and fears of recession. Across the board, investors are worried about their money and whether or not they’ll come out on top.

Crypto has been under fire as naysayers question its ability to endure market volatility and the potential for recession. The biggest question investors must answer is not whether or not they want to leave their money in crypto but rather what value they expect to create and gain from their investments. When you invest in crypto, are you looking for a quick way to cash out or are you looking to invest your money in the future of decentralized finance? Your answer to that question will also be your definition of success in a bear market.

The bear market will not be so kind to those who invested in crypto to get the maximum cash out with minimal effort. To put it plainly: that’s a bad investment strategy, whether or not you invested in crypto. On the other hand, if you invested in crypto to advance the future of financial technology and expand the digital world, you might come out alright. Here are three reasons why the bear market hasn’t shaken my faith in crypto.

Companies are incorporating crypto into their business strategies.

Crypto isn’t on its way out. In fact, many companies are making moves to show the value and trust they have for crypto, even in a volatile market. Chipotle just announced this month that they’d accept crypto as a form of payment. Leading crypto companies are even offering high sign-on bonuses to incentivize investors. Companies are making shifts to make crypto more accessible and incorporated into business strategies. Even Shopify announced that shoppers will be able to buy NFTs through the platform. I believe crypto will continue to be a major part of the growth and development of businesses worldwide, which means that there may be significant value in holding onto the right assets.

Crypto has a high long-term investing potential.

A financial journalist for The New York Times recently pointed out that the United States has been in a recession 14% of the time since World War II. The report noted that fear is the worst motivator in financial decisions and has caused significant losses for investors over time. Those who invested in crypto with the goal of investing in the future of decentralized finance (DeFi) may benefit from sticking it out because crypto has a high long-term investing potential.

Crypto offers unique and varied opportunities for investors beyond more traditional stocks—and that is where its power lies. For example, one way that crypto can change the world is by providing incentives for people to use their money for the good of others, not just for their own financial gain.

Although traditional finance is at the crossroads in defining the intrinsic value of a crypto token and how it would act as a productive asset like investing in factories, housing, farmlands, etc., I believe novel methods of attributing value to a given crypto asset will emerge from value-accrual mechanisms that come from decentralization. In recent years, billions of dollars have been invested in crypto startups by top global venture capital firms as they realize the full potential of decentralized platforms, where collective ownership and governance rights lie in the hands of the token holders rather than a few powerful brokers. Decentralized finance represents an opportunity for the common man to own a piece of the global financial system and transparently capture value through novel mechanisms that are rapidly emerging in the crypto ecosystem.

These benefits strengthen the thesis that crypto will be an enduring asset for investors.

Downturns lead to innovation, creativity, and better ideas.

Billionaire Mark Cuban is a longtime investor in the digital space and recently compared the downturn of cryptocurrency to the beginning stages of the internet. At the start of the internet age, there was a great reckoning that revealed which organizations were trustworthy and reputable and which would not endure. He said the same will happen with crypto and referred to the Warren Buffet quote, “When the tide goes out, you get to see who’s swimming naked.”

Cuban went on to say that the downturn facing the crypto industry will ultimately lead to better ideas and more refined businesses. We’ve seen this happen thousands of times: Great innovation is built out of hardship. It’s the age-old metaphor about the refinement of gold: Heat brings the impurities to the surface, so the final product is more pure and valuable. The decline we’re witnessing in cryptocurrency will only yield a better outcome in the future. We just have to wait.

So, should you sell all of your crypto? My advice is this: First and foremost, use good judgment. Not all tokens are the same. Learn to identify quality projects based on remarkable innovations built by teams that are transparent and open. Then, determine what kind of investor you want to be. If you’re looking for a quick gain and a get-rich-quick scheme, then I understand your concerns about crypto’s steep decline—it doesn’t look like you’ll cash out anytime soon. However, if you want to be the type of investor that adds value to the market, pushes forward the future of finance, and takes the type of risks that can change the world, then hanging onto your crypto might be the best choice. Perhaps it’s time to take the meaning of “bear market” at face value and become like bears in our investments: Hibernate in the winter, and step out in the spring, ready and equipped for a season of prosperity.

The above is for informational purposes only, and you should not construe it as legal, tax, investment, financial, or other advice. Nothing stated above constitutes a solicitation, recommendation, endorsement, or offer to buy or sell any securities or other financial instruments.

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Elizabeth is the co-founder of Lindy Labs and creator of Sandclock, the chain-agnostic DeFi wealth management platform that enables users to save, give, invest, and spend cryptocurrency.

The Patent That Wants to Fix Crypto’s Volatility 5 2291

The number of blockchain-related jobs posted on LinkedIn more than tripled last year, according to CryptoCoin News. And blockchain patent filings more than doubled. Companies and individuals alike are innovating, exploring the blockchain’s well of possibilities. Major fintech companies, meanwhile, are gobbling up blockchain patents like they’re going out of style. But cryptocurrencies themselves still have yet to see a mainstream embrace.

The main problem with crypto right now is the same problem people have been talking about since Satoshi Nakamoto said Let there be Bitcoin: volatility. And ever since Bitcoin’s dramatic rise and fall around the turn of last year, cryptos have become virtually synonymous with wild fluctuations.

This reputation has given Bitcoin specifically, and cryptos in general, a mixed reputation. By now we’ve all heard the songs of praises from evangelists and the sour sneers of financial titans alike. Crypto is exciting because it’s unstable; crypto is unrealistic for the same reason.

The Primary Criticism of Cryptos

According to Eric Lamison-White, founder of the investor’s crypto intel platform Pareto Network, volatility is the “primary criticism of cryptocurrencies.”

But he doesn’t think it has to be that way. What if you could stabilize your crypto accounts? Lamison-White says the risks of owning cryptos are “easily mitigated by a variety of hedging techniques that are available in all other asset classes.”

He proposes treating crypto accounts like more traditional assets. “Hedging with options, futures and swaps allow for stable value or any risk profile that an owner or even a speculator would desire.”

That’s the idea behind his patent, filed in 2014, for a structure of interconnected accounts. The system “removes volatility from owning cryptocurrencies,” Lamison-White says, transferring its fluctuations into a hedge account. Here’s how it works.

Lamison-White’s System

The system requires at least two accounts: one for your cryptos and one you’ve funded with fiat currency, let’s say $400 US dollars. These accounts connect to a network of decentralized nodes, which measure the amount of cryptocurrency you have from moment to moment. If there’s any drop in the crypto’s value, the system automatically deducts from your $400 in the other account and transfers it to compensate. When the value of your crypto goes back up, the system re-deposits back into your fiat account.

This holds the value of your crypto assets steady, while transferring its volatility to your hedge account.

What makes it unique compared to other trading systems is that crypto assets can be divided into infinitely small portions. “A futures contract on oil costs $80,000 for example, although a trader only needs to put up maybe $4,000 as a minimum,” Lamison-White says. “This is because the contract represents the price of 1,000 barrels of oil or something crazy.” He notes that even hedging stocks are usually offered in units of 100 or 1,000.

Not so with crypto, where the “infinite divisibility of the asset itself” makes hedging much more finely tuned. Because cryptos are pure math instead of physical assets, “arbitrary sized contracts can be traded just as easily with larger contracts.” One future could represent one bitcoin, for example, but you can also trade in .01 increments. With fractional futures and options, people with very small amounts of cryptocurrency can be shielded from price fluctuations in a way that had only been available to the wealthiest and investment banks for most of the last millennia.

The System at Scale

The system gets even more interesting when you make it scalable. According to Lamison-White, you could have multiple people funding and connecting to the same hedge account, each using it to stabilize their own crypto accounts. Alternatively, you could connect multiple hedge accounts to a single crypto account. Suddenly the possibilities extrapolate, like tinkertoys, developing into an interconnected network of crypto- and fiat-funded accounts, with a variety of owners controlling their assets at a variety of access points, everything regulated with the intelligence and transparency of a decentralized ledger.

Patents Like This are Attracting Corporate Giants

There’s a feeding frenzy going on for patents like these. Visa filed a patent for a B2B blockchain payment system, Mastercard developed its own blockchain patent for anonymous transactions, and Wal-Mart has come out with a few as well. But it’s Bank of America that’s gobbling up the most. With claims to at least 43 live blockchain patents, the financial giant holds more than any other person or company.

Whether they’re just trying to get a leg up on the future of tech, or positioning themselves to harangue the little guy with barrages of lawsuits for intellectual property rights, we’ll just have to wait and see.

Whether or not Lamison-White anticipated the blockchain patent arms race, he was ahead of the curve, filing for his patent in 2014. It could be the thing to finally put skeptical minds to rest about the viability of crypto assets. And with big financial institutions like Bank of America placing a premium on innovative blockchain patents, he may have spun ether into gold.

How the Apex Token Fund Democratizes Investing 376 8161

Most hedge funds require a minimum investment and involve some kind of substantial lock-up period. That’s to say, if you want to participate, you’ll need deep pockets and a long term vision. We’re not talking penny stocks or flash-in-the-pan token sales here.

Curious, then, that hedge funds should find compatibility in a space that’s seen so much in-and-out investing until now. Not only does cryptocurrency and the blockchain open up investing for all, but it’s democratizing hedge funds as well.

How Does a Hedge Fund Work in a Token Framework?

Hedge funds within a token framework, like the APEX Fund, resolve issues of liquidity and reduce barriers to investing by making use of a FOF (Fund of Funds). This is a type of investment strategy that holds a varied portfolio of investment funds, rather than underlying assets.

The APEX Fund is tokenized by its APEX token, which is an ERC20 token running on the Ethereum blockchain. Investors can gain access to a range of options previously only in the domain of a privileged few, without raising huge sums of capital. And the lock-up period is removed as well.

Says Apex Fund CEO and Managing Partner, Chris Keshian, “Apex Tokens are freely tradable, meaning that you could trade your shares in the fund when the fund launches. There’s no lockup period. This is different from traditional funds where there’s usually a year-long lockup period, at least, on capital that’s invested. With the Apex Token, shares are liquid from day one.”

Leveling the Investor Playing Field

“For the most part,” says Keshian, “hedge funds have a high minimum requirement, at least a million dollars, which precludes most of the average investors from participating in these funds. For us, you can have multiple shares in the hedge fund and include a bunch of smaller investors. The tokenized framework allows the democratization of access to these top hedge funds, as any qualified investor can purchase $APEX tokens.”

What Will Make Apex Stay the Distance?

The cryptocurrency markets are changing and investors looking increasingly to the long term. It’s not the all night party and gigantic gains of 2017 anymore and investors need to be more sensible about their decisions. Says Keshian, “Any investor who wants exposure to this asset class is not going to be actively trading, and they aren’t taking short positions in the space. They probably don’t have the technical expertise or the capacity to do that. As this emerging asset class continues to mature, it is becoming harder for the average investor to realize gains, or appropriately select lucrative investments.”

Investors don’t have to use hedge funds, but they provide diversified exposure and expertise in a tumultuous market. “The alternative to just buying and holding crypto yourself is to invest in something like Apex where you’re just holding one token, and that token provides broad, diversified exposure to the leading trading strategies in the space,” Keshian explains.

“Each of these individual funds is shorting, doing arbitrage strategies, or similar things that still make money in a bear market. This exposure makes a compelling case to use Apex, especially when we’re in a bear market. By holding $APEX tokens, investors effectively have their capital managed by professionals, who are engaged with the crypto market full time.”

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