Better be safe than sorry
Bitcoin has been a key market for risk-off trading during the recent volatility spikes
When markets are hard to predict, the smart money is always keen to play it safe. That’s exactly what “hedge your risk” was coined for. The current bull market traces its beginning back to the financial crisis and we are yet to see the much anticipated pullback. But when the foundations of the market start to shake, expect the smart money to be the first to cover their basis. In other words, better be safe than sorry. And that is where Bitcoin comes into play.
Despite its volatility, Bitcoin has been a key market for risk-off trading during the recent volatility spikes on the back of geopolitical tension. The threat exchanges between North Korea and the US increased the interest in Bitcoin that saw its price reaching dizzy highs above $5000, despite the fact that it is still an unregulated market. Should central banks move towards regulation, get prepared for reduced volatility and higher demand.
The recent missile test of North Korea was the last straw that resulted in increased sanctions from the UN, with the aim to control the country’s imports and exports and ultimately their ability to get their hands on hard currency. Whether these measures are enough to put an end to Kim Jong-un’s nuclear aspirations remains to be seen.
What is for sure though is that the country is loading on Bitcoin and digital currencies as a response with South Korea’s cryptocurrency hub their main target. Should North Korea’s interest in cryptocurrencies continue, get prepared for fresh price highs.
With 358% YTD increase in value, it would be no surprise to see the Bitcoin reaching $5,500 by the end of 2017.
Hedging the risk in the Bitcoin market online has become a popular option as brokers are starting to offer Bitcoin CFDs with 25:1 leverage. For those who hold Bitcoins, hedging the risk online could simply mean going short. In that way you could be protected from potential downsides, as your short CFD positions may offset the loss in value.