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What’s Happening in Crypto Market?
The entire crypto market is swinging from side to side, comfortable in smooth curves and in limited range. After the FTX fallout in 2022, the trust on such currencies has been crushed and the market turned totally in the downside range with no signs of cooling down. However, 2023 gave a fresh opening to major digital currencies including Bitcoin and Ethereum and the crypto market has gradually started turning green due to the relaxed macroeconomic situation and cooling inflation.
But, market sentiment has been turning from “fear” to “greed” and now to “neutral”. This is the nature of the cryptocurrency market which is highly volatile and changes unexpectedly. The cryptocurrency market which showed a kind of stability and steadiness last month, is again showing nervousness as markets are feeling very jittery about the rate hikes happening in the U.S. and its impact on liquidity.
The largest cryptocurrency by market capitalization, at the time of writing trading for $29,150 according to CoinMarketCap, with 1% 24-hour fall.
If one thing which is really moving Bitcoin and the overall crypto markets upside down is the stance of the U.S. Federal Reserve on interest rate hikes. Bitcoin after crossing the level of $31,000 is now trading in consolidated range as investors are eagerly looking nervous.
If we see the current volume in the digital market, then it stands at $1.18 trillion, at the time of writing. However, if we talk about the world’s two largest currencies, BTC and ETH which were clearly topping the charts till last month are showing little signs of recovery at the moment. Bitcoin is trading at $29,150 levels and Ethereum is moving around the levels of $1,850,registering a plunge of 1%, at the time of writing.
Crypto experts believe that the current situation is difficult and the road to recovery is very long. As most of the currencies still lag very much behind their all-time highs. Such as Bitcoin is still more than 50% down from its all-time high level which touched in November 2021 at $69,000, similarly Ethereum which is now trading at the levels of $1,800, touched the all-time high levels of $4,000, way back in 2021.
That said, till now the crypto market has undoubtedly responded positively to the global financial uncertainties and has been able to stay strong amid tightening credit conditions and shaky bond market volatility, but since crypto cannot sail alone in this boat, all the other financial assets have to follow the same sentiment for a balanced atmosphere.
Step-by-Step Guide On How To Invest In Indian Cryptocurrency Market
Select A Crypto Currency: Choose a crypto coin in which you want to invest. Like any other asset class, each cryptocurrency has its own fundamentals and are backed by different blockchain networks, mining techniques and intrinsic value. As cryptocurrencies are extremely volatile, it is crucial to do your research well and then decide how much money is to be put in that specific cryptocurrency.
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What Is Hedging?
Hedging is a risk management strategy employed by individuals and institutions to offset potential losses that may incur on an investment.
An Example of Hedging Your Bitcoin Position
Let’s say you own $10,000 worth of BTC and you want to hedge against a possible decrease in its price. You can consider doing the following to hedge your position.
Suppose bitcoin is currently trading at $50,000. You could buy a put option that gives you the right to sell Bitcoin at $50,000 at a future date. Let's say you pay a premium of $500 for this option (actual prices would depend on market conditions).
If bitcoin's price falls to $40,000, you can exercise your option and sell your bitcoin for $50,000, significantly reducing your losses. The cost of this hedge would be the premium you paid for the option. In this example, you would need 0.2 BTC to cover your portfolio. The cost would be 0.01 BTC ($500/$50,000).
Alternatively, you might sell a futures contract for bitcoin. Let's say you sell a futures contract for 0.2 BTC, agreeing to sell Bitcoin at $50,000 in one month. If bitcoin's price falls to $40,000, you could buy 0.2 BTC at the lower price to fulfill your contract, thus effectively selling your bitcoin at $50,000 and offsetting the losses in your portfolio. However, if bitcoin's price increases, you would still be obligated to sell at $50,000, potentially missing out on any price gains.
The concept is similar to taking out an insurance policy. If you own a home in a flood-prone area, you would want to protect that asset from the risk of flooding by taking out flood insurance. In financial and crypto markets, hedging works in a similar way. It involves making an investment designed to reduce the risk of adverse price movements in an asset. ##ContentStar##BountyCreator##GateioBountyCreator# 
