Smartvestments 30: Dual Investments for Crypto

Twenty years ago, a trader had minimal options to transact on any financial market. The access to equity, ETFs, or REITs was heavy, and brokers were required. Moreover, people had to prepare in advance their documents because the entrance to the internet or even personal PCs was rare and limited in the 2000s, even in developed countries.

No one would have imagined that we would be able twenty years later to DCA a cryptocurrency, in a matter of minutes, from a mobile smartphone, with cellular data from a satellite. Technology has advanced so much that investment opportunities are enormous nowadays, and anyone can start with any amount of money directly from their desk at home. Dual investments represent a relatively new opportunity.

What are dual investments, more precisely?

Dual investments from the crypto space refer to double currency investments representing a financial instrument in traditional markets, where traders profit from the relative differences between two currencies. Don’t forget to add options and calls to this framework. Thus, we’re talking about an investment product where we actively trade the differences between two assets and a derivative product. When we’re talking about derivative instruments in trading, we’re referring to speculative moments, when the traders bat on the future price of an asset, wherever it’s lower or higher, depending on the results of technical analysis. Trading derivatives is way riskier but offers higher returns if done right. Such an investment product became widely known in the cryptocurrency market as an alternative to simple long and short strategies.

How can I do this through crypto?

Dual investments bring a higher return than traditional frameworks and strategies. Even if they’re called like this, dual investments mainly refer to active trading, and intelligent traders can profit even when the market is uncertain because we’re covered against some risks.

Suppose we hold 10 BTC in our wallets and wish to sell them. If we choose such a combined instrument, we will win annual interest regardless of where the price is heading. But suppose the price we speculated is also hit. In that case, the trader has extra income. So dual investments are a merge between staking (where cryptocurrencies are locked up over a specific period) and derivative trade.

It’s important to mention that everything depends on how the market moves and the asset we’re planning to trade. Besides this, even if we’re not required to be pros at math, it’s essential to do enough calculus to discover how much we will win. For example, some cryptocurrency pairs will have over 100% APY — but this yield is meant for one whole year, while our position is open for a limited time, like a week or a month — so calculate the numbers before executing correctly. Given that the amount of money will be locked into the position, we will undoubtedly choose limited periods.

What advantages do dual investments bring?

Of course, it’s about way higher returns than simple positions. There are also compound yields to take into consideration:

• There’s the interest itself, which is offered to the user regardless of whether the position is successful.
• The investor can win more money if the price moves correctly according to speculation. In this case, the trader also benefits from a bit of risk coverage because if the base value of the asset moves against the bet and it loses money, the interest is still paid. And in ideal cases where the risk is limited, that interest might cover the loss.

Everyone knows that the market is more efficient when it offers more options and alternatives to choose from to the users.

But can I lose money? What are the risks?

Yes, users risk wholly or partly losing their position, as in any other area of the TradFi space. The risks implied when trading cryptocurrencies must be well-researched and documented by every investor. Especially when trading derivative products, a trader must calculate its Risk/Reward Ratio. The volatile nature of cryptocurrencies makes it possible for movements of assets to lead to more significant losses than the received interest (which can’t cover the loss anymore if it’s too substantial).

Nobody can control the market or accurately predict where the price is heading, and the money reserved for the position will be locked until the trader closes it. So it’s certainly not a good alternative for inexperienced or weak-hearted investors.

Remember that you’re exposing yourself to financial risk when trading cryptocurrencies. Your Friendly Crypto Exchange always recommends trading sums of money you’re comfortable with. Profit-taking and rigorous risk management are what define profitable traders.

Disclaimer: The content of this article is not investment advice and does not constitute an offer or solicitation to offer or recommendation of any investment product. It is for general purposes only and does not take into account your individual needs, investment objectives and specific financial and fiscal circumstances.

Although the material contained in this article was prepared based on information from public and private sources that IXFI believes to be reliable, no representation, warranty or undertaking, stated or implied, is given as to the accuracy of the information contained herein, and IXFI expressly disclaims any liability for the accuracy and completeness of the information contained in this article.

Investment involves risk; any ideas or strategies discussed herein should therefore not be undertaken by any individual without prior consultation with a financial professional for the purpose of assessing whether the ideas or strategies that are discussed are suitable to you based on your own personal financial and fiscal objectives, needs and risk tolerance. IXFI expressly disclaims any liability or loss incurred by any person who acts on the information, ideas or strategies discussed herein.