Boxmining

Category: Cryptocurrency Trading

Trading is a fundamental aspect of the cryptocurrency space. As exciting as crypto trading is, it is also highly risky and complex. This section gives an introductory guide to the various aspects of cryptocurrency trading.

  • Top Best Cryptocurrency Exchanges in 2022

    Top Best Cryptocurrency Exchanges in 2022

    This is an update of our previous top crypto exchanges article for 2021. A lot has changed since then and here’s what to look for in 2022.

    The easiest way to start trading cryptocurrencies such as Bitcoin is through a cryptocurrency exchange, and in this article, we list what we consider to be the top cryptocurrency exchanges in 2022 with the beginner user in mind. For this article, exchanges which we at Team Boxmining use frequently are listed in Tier 1, exchanges we occasionally use are listed in Tier 2, down to those which we seldom or do not use at all are listed in Tier 3. However, this is only based on our personal preference only. Potential users should also always check if the exchange is supported in their country as there are geographical restrictions. 

    Check out our latest video where we talk about our picks for the best cryptocurrency exchanges in 2022:

    https://www.youtube.com/watch?v=YRocD5PqvZ8
    Best Cryptocurrency Exchange in 2022? (EXCLUSIVE trading fee discounts)

    Tier 1 Exchanges

    Binance

    Binance exchange
    Binance supports over 100 cryptocurrencies and is available in 180 countries

    Founded in 2017 and currently serving over 13.5 million active users worldwide, Binance allows you to buy, sell, and trade cryptocurrency with low fees. You also have the option to earn interest on your cryptocurrencies by staking them for a period of time to earn an interest rate of between 0.5%-10%.

    Binance supports trading of over 400 different types of cryptocurrencies and with more being added almost every week. In fact, Binance has become so popular as a cryptocurrency exchange that the mere news of new coins being listed can cause the tokens’ prices to skyrocket. 

    Cryptocurrencies can be purchased on the Exchange through a variety of ways: PayPal, bank transfer, credit card, and debit card (although they charge a hefty 4.5% fee). It is worth noting however, that users cannot simply exchange their US dollars for cryptocurrencies. Nevertheless, the aforementioned purchase methods should be sufficient for most, if not all cryptocurrency traders.

    As for security measures, Binance not only has an asset fund as insurance in case of misappropriated user funds but also provides two-factor authentication.

    Binance also has its own native token- BNB, which comes 4th in terms of trading volume. The token can be used for various features and discounts on the exchange.

    Binance does have a US version of its exchange for US users at Binance.US which was launched in September 2019. Although Binance.US will have fewer cryptocurrencies available for trading and features in order to be compliant with US regulations.

    Binance is Team Boxmining’s second most frequently used exchange. Binance is easy to use, their team is always quick to respond if there are any issues with the exchange, and pioneered many of the special features we come to expect today such as Initial Exchange Offerings (IEOs). Binance also caters to experienced traders with advanced trading options and plenty of analytics. Novice users will inevitably experience a learning curve, but once you find your way around, it becomes almost second nature.

    Check out Binance Exchange Review 2021: Best Crypto Exchange? For a detailed look at what Binance has to offer. 

    Sign up for Binance here!

    KuCoin

    kuCoin exchange
    Its focus on security and intuitive design has attracted fervent supporters for KuCoin

    KuCoin is a relatively new cryptocurrency exchange that has quickly developed a fervent fan base thanks to its intuitive design and high level of security. The Exchange is highly regarded for its large number of different cryptocurrency pairs, which means users can purchase a wide variety of cryptos. 

    The Exchange is also spreading into new regions at a rapid pace. In just 1 year their adoption rate for different countries has skyrocketed. For example, in Latin America, there was a 171% increase, in Africa a 130% increase, and in Asia a 67.5% increase.

    KuCoin supports over 500 cryptocurrencies which means you can trade lots of small-cap tokens with low trading fees. At team Boxmining, we find that if we want to trade small-cap coins, we would need to use our MetaMask and then trade on different platforms and different DEXs. And if it’s an ERC 20 token you would have to pay ridiculously high gas fees which are really not practical. So, if these small-cap tokens are already on KuCoin, then you can save yourself a lot of unnecessary costs.

    KuCoin also allows you to use trading bots through their mobile app. Trading bots can
    automatically buy and sell your cryptocurrencies so you don’t have to be online all the time to follow the market. However, it’s not always clear how they’re investing your money, and you need to understand the cryptocurrency trading strategies they use. Also, if you’re buying and holding cryptocurrencies for the long term, these bots may not be able to help you a lot.

    On the downside, Kucoin is a crypto-only exchange, which means you will need another exchange if you’re looking to purchase coins with fiat currency such as HKD, USD or CAD. That means that Kucoin is not a great option for anyone just getting started with cryptocurrency, but if you are an experienced trader then KuCoin is a great way to diversify your cryptocurrency portfolio.

    SwissBorg

    SwissBorg
    SwissBorg is a popular choice amongst European users and has a very intuitive and user-friendly app.

    SwissBorg was launched in December 2017, they are based in Switzerland and are fully compliant with Swiss Law, making them hugely popular amongst the European cryptocurrency trading community. The Exchange is available in over 100 countries (although currently not supported in the US). Please note however that for some countries, the full range of features offered by SwissBorg may not be available.

    SwissBorg supports over 30 cryptocurrencies and 16 fiat currencies. New cryptocurrencies are continuously being added and users can vote for the next cryptoasset to be listed on their app. Users can directly fund their SwissBorg accounts via bank transfer, and SwissBorg does not charge any fees for bank transfers.

    Another popular feature is SwissBorg’s multi-award-winning app which allows users to access their crypto wallets and trade on the go.

    To keep ahead of the yield farming and decentralized finance (DeFi) craze, SwissBorg offers their Smart Yield account for yield farming, which allows users to get exposure to farming without much prerequisite knowledge. The Smart Yield feature does this by scanning and finding a range of DeFi and CeFi (Centralized Finance).

    SwissBorg’s native token $CHSB is a multi-utility token that entitles holders to lower fees when buying/selling Bitcoin, CHSB and stablecoins on the Exchange. Other benefits include being able to have 2x yield on your USDC, BTC, ETH, XRP, and CHSB holdings.

    Learn more about SwissBorg with our in-depth guide- SwissBorg ($CHSB): What is it?

    Sign up for SwissBorg with our exclusive link to get FREE CHSB!

    Coinbase

    coinbase exchange
    Coinbase offers a more limited selection of cryptocurrencies but makes up for it with high security and ease of use

    Coinbase was launched in 2012 and currently has over 30 million users spanning 103 countries. While Coinbase may not offer a wide variety of cryptocurrencies, the San Francisco-based exchange platform is still a top favorite among many investors due to its highly secure and easy-to-use platforms. Also, Coinbase is the first stop for many beginner traders (especially those from the US) as they have a very easy-to-use mobile app, you can directly fund your Coinbase account from your bank account. Coinbase is also particularly popular in the US since it is the first publicly listed US crypto exchange and it is compliant with US regulations.

    Coinbase’s popularity stems from the fact that their platform has one of the fastest and easiest cryptocurrency buying processes, which along with their claim to have never been hacked, makes them an ideal choice for beginners who are looking to get started with cryptocurrency investment. Advanced users can also opt for Coinbase Pro, which has more trading features.

    Coinbase supports hundreds of digital currencies, however, in terms of the number of cryptocurrencies supported, it definitely loses out to other major crypto exchanges in this respect. Coinbase also charges higher fees compared to most other exchanges, charging $0.99-$2.99 per purchase under a $200 transaction and an additional 0.5% fee depending on the amount traded. However many novice or infrequent traders consider this a fair price to pay for the convenience the platform offers and the fact that it is one of the few exchanges available to US users.

    As mentioned earlier, Coinbase does charge higher fees compared to other cryptocurrency exchanges on the market, hence we have prepared our popular guide- Coinbase Fees: How to Avoid Them.

    Tier 2 Exchanges

    eToro

    eToro exchange
    From social trading to crypto, eToro boasts a whopping 17 million users worldwide

    Established in 2007, eToro was originally a social trading exchange that launched its cryptocurrency platform in 2018. It has since grown to a user base of over 17 million users worldwide.

    The main factor to note about eToro is that it is extremely simple to use, which can be both positive and negative. eToro currently only offers the 6 major cryptocurrencies: Bitcoin, Bitcoin Cash, Etherium, Litecoin, XRP, and XLM. This means that the platform is perfect for those looking to trade in only the biggest cryptos using a simple interface.

    In addition, the only fiat that this exchange deposits in is USD, which works out great if you are a US-based trader but not so much if you’re interested in dealing with other currencies.

    Whilst we at Team Boxmining do not use eToro, our friends who only occasionally trade cryptocurrencies are big fans due to its simplicity. However, the downside is the lack of supported cryptocurrencies, features and trading discounts. 

    Kraken

    Kraken exchange
    Founded in 2011, Kraken is considered to be one of the more established exchanges

    One of the more established cryptocurrency exchanges, Kraken was founded in 2011 then relaunched in 2013. Kraken has a wide variety of cryptocurrencies available for trade, and currently supports over 200 traders globally.

    Kraken also offers margin trading and futures trading. With its margin accounts, you can borrow up to five times your account balance to trade crypto assets. Futures trading — contracts which allow you to buy or sell an asset at a set price on an upcoming date — is available for Bitcoin, Ethereum, Litecoin, Bitcoin Cash, and Ripple.

    The Exchange also offers its own futures trading platforms. But institutional clients can take advantage of expert insights, one-on-one consultations, account management support, and more.

    Kraken is hugely popular amongst European cryptocurrency enthusiasts due to its range of features. 

    Tier 3 Exchanges

    OceanEx

    oceanex exchange
    OceanEX is built using cutting edge AI tech, but is a bit lacking in liquidity

    OceanEX was launched in 2018 by BitOcean Global, a fully registered and licensed Japanese trading platform. BitOcean Global consists of core members with past experience from Morgan Stanley, BNP Paribas, and Deloitte. 

    With a variety of features to improve user and trading safety, OceanEX is the trading hub of the VeChainThor Ecosystem. The main advantages promoted by OceanEX are its AI security, tailor-made services, lightning fast trading, and global support. However, the platform lacks liquidity which makes buying and selling coins difficult.

    Coincheck

    coincheck exchange
    Coincheck is the go to if you’re living in Japan

    Coincheck is a Japanese-based cryptocurrency exchange founded in 2012 that also functions as a Bitcoin wallet. The platform is simple and user-friendly and boasts competitive fees, along with features such as cashback for paying utility bills. However, the coins available for trade are limited, and the majority of the additional features are available in Japan only. 

    Tier 4 Exchanges

    Bisq

    bisq exchange
    Bisq does not require user verification, which for some people is a security risk

    Launched in 2014, Bisq is a decentralised exchange with servers distributed worldwide and offers a large variety of cryptocurrencies and fiats for trading.

    However, unlike other exchanges Bisq does not require verification of user accounts, which raises the question of trader safety.

    HitBTC

    hitbtc exchange
    HitBTC also raises security concerns due to the nature of their KYC processes

    Designed for the more experienced trader interested in dealing with altcoins, HitBTC was founded in 2013 and based in Chile. 

    Main concerns surrounding HitBTC are the lack of transparency and clear KYC (Know Your Customer) processes, which raises red flags about the security of the platform. In addition, users have reported that support is slow, with resolutions of issues taking up to several weeks. 

    Conclusion

    Tier 1:

    • Binance
    • KuCoin
    • SwissBorg
    • Coinbase

    Tier 2:

    • eToro
    • KuCoin

    Tier 3:

    • OceanEx
    • Coincheck

    Tier 4:

    • Bisq
    • HitBTC

    Of course, this list is meant to be a guide when selecting the best cryptocurrency exchange for your individual needs, and conducting thorough research and background checks will go a long way in protecting your digital wealth. Be sure to spend some time when choosing your own exchange, and you can enjoy the peace of mind knowing that your coins are in the right hands. 

    In addition, exchange fees are usually a huge factor in choosing which exchange to use. Hence we have compiled our ESSENTIAL guide on How to Save Money on Crypto Exchange Fees.

    Disclaimer: Cryptocurrency trading involves significant risks and may result in the loss of your capital. You should carefully consider whether trading cryptocurrencies is right for you in light of your financial condition and ability to bear financial risks. Cryptocurrency prices are highly volatile and can fluctuate widely in a short period of time. As such, trading cryptocurrencies may not be suitable for everyone. Additionally, storing cryptocurrencies on a centralized exchange carries inherent risks, including the potential for loss due to hacking, exchange collapse, or other security breaches. We strongly advise that you seek independent professional advice before engaging in any cryptocurrency trading activities and carefully consider the security measures in place when choosing or storing your cryptocurrencies on a cryptocurrency exchange.

  • Risk Management Strategies in Crypto Derivatives Trading

    Risk Management Strategies in Crypto Derivatives Trading

    What is Derivatives Trading?

    A derivative is a contract based on an underlying financial asset such as a stock, bond, or currency. The value of the underlying asset is subject to changes according to market conditions. 

    Traders can use derivatives to earn profits by speculating future price movements of the underlying asset, a strategy becoming increasingly popular among cryptocurrency traders.

    Why the Need for Risk Management?

    The cryptocurrency market is volatile and speculative.

    Everyone will take losses, including the most experienced professional traders. That is the name of the game. 

    Without risk management, a trader could deplete their budget and the game is over. The most important goal is to stay in the game. By analyzing platforms like Online Casinos Schweiz, traders can gain insights into managing their funds wisely. As long as the trader is still playing, they can make up for losses. 

    For that reason, it’s important to know when to take losses, how to manage risk, and generally aim to make more good trades than bad ones. 

    Important Things to Consider Before Trading 

    First, a trader should determine their total budget. 

    It does not matter if it is $100 or $100,000,000. The essential point is to have a given budget freely available. Traders should not use loaned money, which has to be paid back at a deadline. Using retirement money is not encouraged either. 

    A trader’s budget should be considered as “play money”. If a trader is emotionally attached to that money, these emotions can affect their trading decisions. A trader should aim to be a calm and collected statistician, not a passionate and desperate gambler.

    Once a budget has been allocated, the next step is to look for a trade. There are tools available to find trades such as fundamental, sentiment, and technical analysis. But before entering a trade, a trader should determine the risk size, entry price, and stop loss.

    The general rule of thumb for new traders is to risk at most 1% of the budget per trade. 

    The entry price might be the current market price or the limit set for an order.

    Finally, it is essential to decide a stop loss before one enters a trade. How can a trader pick a stop loss? Technical analysis is the only available method, apart from randomly picking something. A trader can look at support and resistance levels, or trendlines.

    These are the four ingredients for risk management: Budget, risk size, entry price, and stop loss. Having these ingredients will make it easier to manage risks when trading.

    Transaction or Trade Volume

    The volume of a transaction or trade is also known as “position size”. The position size is defined in relation to a trader’s risk tolerance and the size of their budget. 

    What are some risk management formulas that traders can use to determine their position size?

    Here is one example:

    Position Size = (Risk x Budget) / (Entry Price – Stop Loss)

    Let’s say the trader has a budget of $10,000 and wants to buy Bitcoin for $30,000 with a stop loss at $29,500 and a risk of 1%.

    Their position size would be (1% x $10,000) / ($30,000 – $29,500) = $100 / $500 = 0.2. They can buy 0.2 Bitcoin for this trade to stay within their risk tolerance and budget.

    Some consider it advisable to make this calculation before every single trade. It can be tempting to take larger risks. (Zolpidem) However, this can be a recipe for disaster given the volatile crypto markets. 

    It’s always safer to stick to the math and be the calm statistician. 

    A trader can make a spreadsheet, where they can enter the parameters and it computes the position size or risk for them. This way it only takes a few seconds per trade and a trader can easily manage risks with every trade.

    Stop Loss Orders

    Stop loss (or just “stop”) is an order that traders can set to automatically close losing trades. It is the primary tool for risk management because traders can manage trades effectively during abrupt and unexpected market changes. 

    For instance, if there was some reported hacking, it could prompt a large price movement for the asset. If a trader has open trades and they happen to be in the opposite direction of the market movement, then they could be in danger of losing all their invested funds. A stop loss to sell will automatically prevent that from happening, which is why traders should always place a sell stop to avoid considerable losses.

    Traders can also use a buy stop to buy when a target price is hit. A buy stop can be useful for automatically buying into target entry points.

    Stick to the Trading Strategy

    A trading strategy is only effective when a trader sticks with it, in sickness and in wealth. 

    Trading is a matter of getting the law of averages to work in one’s favour, so maintaining discipline is vital for consistent and profitable trading. 

    That being said, a trader’s strategy should be developed to fit their own goals, risk tolerance, and lifestyle. It should be based on reality, not on hope. 

    If a trader tries to copy someone else’s trading strategy without truly understanding it, chances are they will be incompatible with the strategy and will have trouble following it.

    At the end of the day, each trader is accountable for their own trade decisions and therefore must be cautious when deciding on a trading strategy and seeking market opportunities. 

    Avoid Emotional Trading

    There are two main emotions that will try to sway a trader from their strategy: fear and greed. These emotions are the culprits behind FOMO.

    FOMO – the fear of missing out – is when a trader is afraid of missing out on a huge trading opportunity in the market. When FOMO happens, traders are susceptible to abandoning their strategy to chase the trading opportunity. 

    Greed can cause a trader to buy when prices are high because they are afraid of missing out on future gains, and fear can cause a trader to sell when prices are low because they are afraid of losing too much.

    Fear and greed are amplified when a trading decision is based on hype rather than research and calculated strategy.

    Understanding one’s emotions and keeping them under control will help traders avoid taking uncalculated risks caused by FOMO, and other emotional trading mistakes such as revenge trading.

    Revenge trading happens when a trader tries to force a trade to recover from a loss. It’s driven by anger suffered from the loss and lust to make it all back quickly. This type of trading can easily cause a trader to invest more than they can afford to lose.

    When a trader is overexposed in an asset, they aren’t trading or investing, they are gambling. When one gambles in general, things start going wrong, both logistically and psychologically.

    Final Words: Risk, Reward, and Statistics

    General wisdom says that it is best to invest and trade using small amounts of the total capital set aside for cryptocurrency.

    That wisdom is rooted in two general concepts: 

    1. Risk / Reward
    2. Statistics

    Statistically, the larger the bid size, the more potential risk / potential reward per position. 

    Reward is nice, but to ensure rewards over time it is vital to limit risk.

    The reality is that the risk of large bid sizes (relative to the total budget) outweigh the potential rewards statistically, over time, on average.

    Consider a budget of $100. Now consider using that entire budget and losing 50% twice in a row, as opposed to using half the budget and doubling it twice. One leaves you with $25 and the other gets you to $225.

    If $100 turns into $25, getting back to $100 will be a real challenge.

    But if 5% of $100 is risked, that’s a total of $5. Even if lost, getting back to $100 from $95 is much easier. Sure, it will take more time to get to $225 using smaller bets, but statistically there will be many more opportunities to make gains and avoid losses.

    There will be more room for skill, and less reliance on luck. Remember that anyone can get lucky, but luck can and usually will run out. Statistics are usually a safer bet.

    Sources:
    https://phemex.com/blogs/risk-management-in-cryptocurrency-derivatives-trading
    https://www.coininsider.com/risk-management-in-crypto-trading/
    https://learn.bybit.com/trading/crypto-trading-risk-management/
    https://www.axi.com/int/blog/education/5-effective-ways-to-fight-revenge-trading#:~:text=Step%20back%20temporarily&text=Take%20a%20day%20off%20or,consider%20revising%20your%20trading%20plan
    https://cryptocurrencyfacts.com/the-basics-of-risk-management-and-position-sizing-in-cryptocurrency

    Disclaimer: Cryptocurrency trading involves significant risks and may result in the loss of your capital. You should carefully consider whether trading cryptocurrencies is right for you in light of your financial condition and ability to bear financial risks. Cryptocurrency prices are highly volatile and can fluctuate widely in a short period of time. As such, trading cryptocurrencies may not be suitable for everyone. Additionally, storing cryptocurrencies on a centralized exchange carries inherent risks, including the potential for loss due to hacking, exchange collapse, or other security breaches. We strongly advise that you seek independent professional advice before engaging in any cryptocurrency trading activities and carefully consider the security measures in place when choosing or storing your cryptocurrencies on a cryptocurrency exchange.

  • Binance futures trading: How to guide

    Binance futures trading: How to guide

    Crypto futures trading allows traders to have exposure to cryptocurrencies without the need to own the underlying crypto asset. Binance exchange offers futures trading to users through Binance Futures, which has 279 trading pairs. This article provides a guide on how to trade on Binance Futures.

    Get 20% off fees when signing up for Binance with the following link!

    What is Binance?

    Binance was launched in 2017 and is arguably the world’s most popular centralized cryptocurrency exchange. It has over 2 billion average daily volume and 72 million site visits daily. The Binance ecosystem includes Binance exchange, BNB Chain, Trust Wallet, Binance card, and other services.

    What is crypto futures trading?

    Crypto futures contracts create an obligation for parties to exchange the asset at a predetermined price and date. On most cryptocurrency exchanges, however, the parties can settle for the cash equivalent. But, the trade must take place. 

    Traders use futures trading to profit from market movements by going either “long” or “short” on a futures contract. Going “long” means that a trader purchases a futures contract expecting it would increase in value in the future. And if the value of the cryptocurrency does increase, the long trader would profit. On the other hand, a trader going “short” means they are hoping prices will drop.

    Learn more about crypto futures trading with our guide- Crypto Futures Trading: What is it?

    What is Binance Futures?

    Binance Futures allows users to trade crypto futures contracts on Binance. It has 279 trading pairs and has the second-highest 24-hour trading volume amongst all crypto derivative exchanges. Binance Futures offers USDⓈ-M Futures and COIN-M Futures. These are perpetual or quarterly contracts settled in USDT/BUSD, or cryptocurrency respectively.

    Binance Futures also has interesting features such as a leaderboard, showing traders with the highest ROI or PNL. Other traders can follow these top traders and see what positions they are holding, as well as copy their trades.

    For traders who are more competitive, Binance Futures has a battle mode where you can guess whether prices will rise or fall within the next 1 or 5 minutes. Then, you will be matched with another player who predicted in the opposite direction. Players will still gain points regardless of whether they win or lose. Points can then be used to earn further rewards.

    Binance Futures trading fees

    Binance uses a maker-taker fee structure. Maker trades are orders that go on the order book partially or fully e.g. limit orders. Taker trades are executed immediately before entering the order book. Market orders are a type of taker trade. The fee charged depends on which type of trade. As maker trades add volume to the order books and thus “make” the market, it is in an exchange’s interest to have more of these orders. Therefore, maker fees are usually lower than taker fees.

    Binance also has a 9-tier VIP structure which offers progressively lower fees for users with high trade volume and substantial BNB holdings. Users who use BUSD, Binance’s USD stablecoin, or BNB for settling fees are also rewarded with lower trading fees.

    The lowest tier, i.e. “Regular users” are traders with a past 30-day trading volume of less than 15 million BUSD or hold 0 BNB. For regular users, the maker/taker fee for USDⓈ-M futures trading is 0.02%/0.04%, and for COIN-M futures, the maker/taker fee is 0.01%/0.05%.

    Highest tier users i.e. VIP 9, users must have a past 30-day trading volume of over 25 billion BUSD and hold over 5,500 BNB. VIP 9 users enjoy a maker/taker fee of 0.00%/0.017% for USDⓈ-M futures trading, and for COIN-M futures, the maker/taker fee is -0.009%/0.024%.

    Binance futures trading fees
    Binance futures trading fees (Source: Binance)

    Extra discount! Enjoy 20% off fees when signing up for Binance with the following link!

    Pros and advantages of trading on Binance Futures

    Binance is one of the leading cryptocurrency exchanges. According to CoinGecko, Binance has the second-highest trading volume with over US$35 million being traded in 24 hours. Here are some of the pros and advantages of crypto trading on Binance Futures:

    • Many trading pairs. Binance Futures have 279 trading pairs, giving traders a wide range of options from popular cryptocurrencies such as Bitcoin ($BTC), to meme coins such as Shiba Inu ($SHIB).
    • Low trading fees and generous fee structure. Maker/taker fees start at 0.02%/0.04%. However, Binance Coin ($BNB) and BUSD holders, and high-volume traders are entitled to discounts, bringing trading fees to as low as 0.0100%/0.0207%.
    • Low minimum trade amount. Traders can start with a minimum trade amount of 0.001 BTC on the BTCUSDT Perpetual market.
    • Binance offers up to 100x leverage. This allows more experienced traders to potentially maximise their gains.
    • Binance has trading tools such as Grid Trading, TWAP, Advanced TP/SL, and Multi-Symbols Trading Page for maximum trading efficiency.

    Cons and disadvantages of trading on Binance Futures

    • Futures trading is not available in the US. So US traders will need to use other exchanges for futures trading.
    • Users must pass the verification process in order to begin using Binance Futures.

    Is Binance Futures trading safe?

    Binance has a US$300 million Insurance Fund to protect traders. The Fund acts as a safety net to protect bankrupt traders from adverse losses whilst ensuring that winning traders are paid in full. The purpose of Binance’s insurance fund is to limit counterparty liquidations. Counterparty liquidations are where the positions of opposing traders are automatically liquidated in order to cover a bankrupt trader’s position. The insurance fund takes the remaining positions when a trader in liquidation has less than 0 USDT after all their positions are liquidated. These remaining positions would be offloaded onto the market gradually and liquidation fees will be collected from users that do not result in bankruptcy.

    Binance also has a Cooling-Off Period function to help traders prevent compulsive trading behaviours. It works by preventing traders from trading futures-related products on the exchange for a predetermined period.

    How to start trading on Binance Futures

    Trading on Binance Futures only requires 5 simple steps.

    1. Sign up for a Binance Account

    To sign up AND get an additional 20% off trading fees click here.

    Alternatively, on the Binance main page, click register and enter your details. Don’t forget to fill in GQWT3T1T for the Referral ID in order to be eligible for 20% off trading fees.

    You can sign up with your phone, email, Google, or Apple accounts.

    2. Open a Binance Futures account

    Go to Binance Futures and click Open Now, if prompted, you can enter GQWT3T1T as the Futures referral code in order to enjoy 20% off trades. Then, complete and get all the answers correct on the 14-question quiz on how to use Binance Futures.

    3. Complete the verification process

    Click Profile and then Verification. Follow the steps and fill in your personal information. A government-issued ID (e.g. a passport) and address proof must be provided, and you must also pass the facial recognition test.

    4. Make a deposit into your Binance account

    Binance allows you to deposit fiat or cryptocurrencies into your account. To deposit, click on your profile and go to Dashboard. Under Fund your Account, you can choose to Buy crypto using Mastercard, Visa, Google, or Apple Pay. Users can also choose to Deposit crypto from other exchanges or their hardware wallet.

    5. Start trading

    On Binance Futures, choose between USDⓈ-M and COIN-M Futures Contracts. On the top left-hand corner (marked in yellow), you can choose which futures contract to trade.

    Choose which futures contract to trade
    Choose which futures contract to trade (Source: Binance)

    On the left-hand side, there are various tools to help you identify patterns or trades such as trend lines, arrows, or Fibonacci retracement. You can use these tools to annotate your charts.

    Binance Futures chart tools
    Binance Futures chart tools (Source: Binance)

    On the top right-hand side of the page, you can select the Margin Mode. Users can choose between Cross or Isolated margin modes. Cross-margin mode means that the entire margin balance will be shared across open positions. However, if there is a liquidation event, the risk is that their entire margin balance and any open positions may be lost. Isolated margin mode, on the other hand, allows traders to manage their risk on individual positions by restricting the amount of margin allocation. The benefit of isolated margin mode is that if a position is close to being liquidated, users can allocate additional margin to that position.

    Select Cross or Margin Mode on Binance Futures
    Select Cross or Margin Mode on Binance Futures (Source: Binance)

    Set your Leverage (if any) by clicking on the top right-hand corner. Traders can set the leverage from 1x to 125x. However, traders should be careful that setting high leverage could result in significant losses in the event of a liquidation.

    Set leverage on Binance Futures
    Set leverage on Binance Futures (Source: Binance)

    On the right-hand side of the page, you can also select the type of order (e.g. Limit, Market, Stop Limit, etc), the order price, and size. For a more automated yet managed trading experience, traders can also select TP/SL i.e. when to take profits, or stop loss. Finally, traders need to select between a Buy/Long, or Sell/Short order.

    Is Binance Futures safe?

    Binance Futures comes with security features expected from every reputable cryptocurrency exchange. Binance Futures requires users to have passed the KYC verification before they can start trading. Before trades are executed, users must also have enabled 2FA authentication and will be sent an Anti-Phishing Code for verification.

    Binance Futures also has a nearly US$300 million insurance fund to protect bankrupt traders from adverse losses. It also ensures that profits of winning traders are fully paid out.

    Finally, if users really need help, Binance offers customer support in 17 different languages via Live Chat or email.

    Conclusion

    Trading futures contracts are a great way for cryptocurrency traders to profit from fluctuations in cryptocurrency prices. Furthermore, Binance Futures is a popular exchange for traders of any level to trade futures since they have a large number of trading pairs. Binance Futures also has the benefit of a huge insurance fund, helpful tutorials, and customer support to ensure that customers have a straightforward and secure trading experience.

    Enjoy 20% off fees when signing up for Binance with the following link!

  • Crypto Futures Trading: What is it?

    Crypto Futures Trading: What is it?

    Crypto futures trading is a type of derivative financial contract. It creates an obligation for the parties to exchange the crypto asset at a predetermined price and date. In this article, we look at what is crypto futures trading.

    What is futures trading?

    Futures are generally named based on the month they expire. For example, a March crude oil futures contract will expire in March and is based on crude oil as an underlying asset. You can also find contracts for other commodities. 

    Traders use the term futures broadly for a whole asset class. And there are multiple futures contracts available based on different types of assets. For example: 

    • Commodities such as crude oil, corn, and wheat;
    • US bonds, or any other government-backed financial bond;
    • Precious commodities like silver and gold; and
    • Index futures such as the Dow Jones Industrial Index.

    For example, a BTCUSD quarterly contract uses BTC as an underlying asset and expires quarterly.

    What is crypto futures trading?

    In crypto futures trading, traders can gain exposure to cryptocurrencies without actually needing to possess the underlying crypto asset. However, there are risks involved with futures trading such as high price volatility.

    Traders use futures trading to take advantage and profit from market movements by going either long or short on a futures contract. Going “long” means that a trader purchases a futures contract expecting that it would increase in value in the future. On the other hand, a trader going “short” means they are hoping prices will drop.

    Here is an example of a futures contract:

    Adam enters into a long futures position when BTC was trading at US$15,000 whilst Bob enters into a short futures position. BTC prices rose to US$20,000 and both Adam and Bob agree to settle their positions. For Adam, BTC was worth more at settlement than when he entered the long position. So Adam makes a profit of US$5,000 from the exchange, being the price difference between the two times. On the other hand, Bob is holding a losing trade since he was holding a short position. So Bob must instead pay the exchange the deficit loss of US$5,000.

    Crypto futures trading
    Crypto futures trading (Source: Binance)

    Difference between options and futures contracts trading

    Futures and options contracts are not the same. An options contract does not impose an obligation on the buyer or the seller. Rather, an options contract gives the parties the option to buy or sell a crypto asset at a fixed price on a specified expiry date. There are 2 types of options contracts: call contracts which give traders the right to buy, and put options which give traders the right to sell.

    On the other hand, in a futures contract, the buyer has to take possession of the underlying asset, and the seller has to sell that asset. The parties can settle for the cash equivalent, which is what happens on most cryptocurrency exchanges. However, the trade must take place. 

    Pros of crypto futures trading

    Here are some benefits (pros) of crypto futures trading:

    • Crypto futures contracts allow traders to gain exposure to cryptocurrencies and possibly profit from their price movements without holding the cryptocurrency itself.
    • Traders can bet against the direction of the market and profit from it. Long traders predict the price of a crypto asset will increase. Whist traders which go short would profit if prices drop.
    • Trading crypto futures with leverage allows traders to potentially have more gains with only a fraction of the total cost. This, however, comes with risks.

    Cons of crypto futures trading

    Here are some risks (cons) of crypto futures trading:

    • Cryptocurrency markets can be very volatile. And unlike traditional markets, cryptocurrencies are traded 24 hours a day. This means traders must constantly check the direction of the market.
    • Leveraged trading is very risky and could lead to substantial losses.

    Conclusion

    Crypto futures trading is a good way to gain exposure to cryptocurrency trading without holding the underlying cryptocurrency. It is also a hugely popular financial product that is offered on most crypto exchanges. Traders however should take extra care and ensure they have appropriate trading risk mitigation strategies in place to manage their portfolios. You would never invest more than you can afford to lose, especially when cryptocurrency markets are by nature extremely volatile.

  • Crypto funding rates: How it works and how to earn passive income

    Crypto funding rates: How it works and how to earn passive income

    Funding rates are periodic payments by cryptocurrency exchanges to traders based on the difference between the perpetual contract market and spot prices. Depending on your standpoint, you could either stand to receive payment or be the party paying it. Many cryptocurrency traders take advantage of crypto funding rates to earn passive income. In this guide, we look at how crypto funding rates work and how you can earn passive income from them.

    What are traditional futures vs perpetual futures contracts in crypto trading?

    To understand what is a funding rate, we must first know the difference between Traditional Futures and Perpetual Futures contracts. 

    A key feature of traditional futures contracts is the expiration date. Traditional Futures contracts usually settle (expire) once a month or quarter. And when this happens, the settlement procedure begins. During this settlement period, the contract price converges with the spot price and then all open positions will expire.

    Crypto-derivative exchanges like Binance often provide Perpetual Futures contracts, which have a similar structure to Traditional Futures contracts. Perpetual contracts, on the other hand, have a significant advantage. The advantage of perpetual contracts is that they do not have an expiry date. So traders can, for example, keep a short position open indefinitely unless they are liquidated.

    Furthermore, Traditional Futures usually have a broker who will ask the trader to top up the amount accordingly based on “margin calls” i.e. the margin difference between the contract price and the spot price.

    Due to the fact that perpetual futures contracts never settle or expire, cryptocurrency exchanges require a system to ensure that futures and index prices converge on a regular basis. This is where the concept of the funding rate comes in.

    What is a Funding Rate?

    Funding rates are periodic payments to long traders, which predict the market will go up, and short traders, which foresee the market will go down. The funding rate amount is based on the difference between the perpetual contract market and spot prices. So, depending on the traders’ position, they can either stand to pay or receive the funding rate.

    When the funding rate is positive, the price of the perpetual contract is greater than the mark price. In such cases, long traders pay short traders. Conversely, the funding rate is negative when perpetual prices are below the mark price. This is when the short traders pay the long traders.

    Why do Funding Rates Exist?

    Futures contracts expire (settle) at a future date. When this happens, the futures price will meet with the current spot price. That is, the futures price is a predetermined spot price at a predetermined date in the future.

    The futures market can be in one of two states relative to the spot price:

    • Contango: The futures market is trading above the spot price; or
    • Backwardation: The futures market is trading below the spot price.

    The difference between the futures and spot market is called the “basis”.

    Whilst perpetual contracts do not expire, they still need to settle at a spot price. However, there are sometimes differences in the cryptocurrency’s prices between the spot and futures prices on an exchange. This is despite the fact that they should be in line since they need to settle against each other over time.

    Therefore, to keep the spot price and the perpetual contract prices in line, exchanges add an interest rate component (i.e. a funding rate). This funding rate incentivizes traders to take positions that help close the price gap, whilst penalizing those that do the opposite. In essence:

    • When the funding rate is positive, those who are long pay those who are short. This means those who are short will benefit. Therefore, people are incentivized to take short positions; and
    • When the funding rate is negative, those who are short pay those who are long. So if you are in a long position, you will receive the funding paid by those who are short.

    Traders try to avoid paying the “penalty” by closing their long or short positions before the funding rate expires. When traders do this, the prices between the contracts and spot prices will begin to converge.

    For example, when the contracts price is above the spot price, the funding rate is positive. In such cases, those who are long pay those who are short. Traders with long positions are encouraged to close their positions before the funding rate expires to avoid paying those with short positions. Meanwhile, traders are incentivized to open short positions because they can receive payment. The effect of this is that the contracts price will be pushed down and the gap between that and the spot price will be closed.

    On the other hand, when the contract price is below the spot price, the funding rate is negative. Shorts will pay the longs. Therefore, traders with short positions will try and close their positions to avoid payment and open long positions to receive payment. Thus, the contract price will be increased to meet the spot price.

    What is the Purpose of Funding Rates?

    The purpose of funding rates is to prevent continued divergence in the perpetual contract market and the spot price for a cryptocurrency. And since prices of cryptocurrencies are consistently fluctuating, the funding rate has to be recalculated periodically. For example, some exchanges like Binance will recalculate their funding rates every 8 hours.

    How to Make Money and Earn Passive Income from Funding Rates

    One tip to make some “passive income” from funding rates is to buy AND short the exact same amount of the cryptocurrency you put your money on. 

    This method balances the positive and negative funding rates, where technically you do not have a position in that particular cryptocurrency market since it is counterbalanced. 

    However, your short trading will get paid on an hourly basis. So, you can get “passive income” on the side, even though overall it mostly turns out to be net value since you have the positive trades too. 

    A lot of large trading firms use this defunding method to get large sums of money quickly. 

    Conclusion

    Crypto funding rates are an integral feature of the perpetual futures market Most cryptocurrency exchanges use funding rates to ensure that contract prices are always in line with spot prices. In turn, traders can benefit from taking advantage of funding rates to earn some passive income with funding fees.

    To learn more about how to profit from funding rates on different exchanges, check out these articles:

  • Binance Funding Rates: What is it and how to profit from it?

    Binance Funding Rates: What is it and how to profit from it?

    Binance is the world’s most visited and used centralized cryptocurrency exchange in the world. The exchange has over 2 billion average daily volume and over 1.4 million transactions per second. The Binance ecosystem includes not only Binance exchange, but also BNB Chain, Trust Wallet, Binance card, and more. Many crypto traders like to take advantage of an exchange’s funding rates and fees to earn some profit and passive income. In this article, we look at how Binance funding rates and fees work, and how to profit from it.

    Sign up for Binance and enjoy 20% off fees!

    What is Binance?

    Changpeng Zhao (CZ) and Ye He founded Binance in 2017. Since then, Binance has become the world’s most popular cryptocurrency exchange with the largest organic trading volume. Binance is available in most countries, including the United States under Binance.us (with the exception of a few states). The exchange also supports 600 cryptocurrencies on its international site and over 130 cryptocurrencies on Binance.us.

    What are crypto funding rates?

    Crypto funding rates are periodic payments of the price difference between perpetual contract markets and spot prices. Funding payments are made either to/by long or short traders depending on the funding rate.

    Funding rates exist to align the perpetual contract price to the spot price. If the perpetual contract trading price is higher than the spot price, long position holders would pay short position holders. Conversely, if the perpetual contract trading price is lower than the spot price, short position holders pay long position holders.

    Learn more about crypto funding rates with our article: Crypto funding rates: How it works and how to earn passive income

    What are Binance funding rates?

    As mentioned above, the purpose of funding rates is to prevent continued differences between the price s fo the perpetual contract markets and spot prices. Therefore, crypto funding rates are periodically recalculated. Binance recalculates its funding rates every 8 hours.

    Users can locate the funding rate, and when the funding interval expires at the top of the Binance Futures page. So as seen in the below screenshot, the funding rate is -0.0014% and the funding period will expire in 3 hours 26 minutes.

    Binance funding rate and expiry
    Binance funding rate and expiry (Source: Binance)

    How does Binance calculate the funding rate?

    Binance calculates the funding rate based on two factors: The interest rate, and the premium.

    Binance Futures generally fixes the interest rate at 0.03% per day (i.e. 0.01 per funding interval). However, for BNBUSDT and BNBUSD, the interest rate is 0%. Meanwhile, the premium fluctuates depending on the price difference between the perpetual contract and the mark price. A large difference, or spread, equates to a high premium. On the other hand, a low premium means there is only a narrow difference between the two prices.

    When the funding rate is positive, it means that the price of the perpetual contract is higher than the mark price. Whereas if the funding rate is negative, the perpetual prices are below the mark price.

    Binance uses the following formula to calculate funding rates:

    Funding Amount= Nominal Value of Positions x Funding Rate

    Where Nominal Value of Positions= Mark Price x Contract Size

    How are Binance funding rates paid?

    When the funding rate is positive, long traders pay short traders. On the other hand, when the funding rate is negative, the short traders pay the longs. On Binance, funding rates are paid between users i.e. peer-to-peer. This means Binance does not take any fees from users paying or receiving the funding rates.

    Funding payments are made every 8 hours at 00:00 UTC, 08:00 UTC, and 16:00 UTC. However, this can be subject to change in cases of extreme market volatility. Traders must have open positions 15 seconds before or after the specified funding times in order to be liable to pay or receive any funding fees.  

    How to profit from Binance funding rates?

    The purpose of funding rates is to encourage traders to take positions that allow the perpetual contract prices to be in line with the spot market. So, traders can develop strategies that allow them to take advantage of funding rates and profit from it.

    How to be notified of Binance funding rates

    Binance offers a notification feature where they will send you an email/SMS/in-app notification when the funding rate reaches a certain percentage. To activate this feature, log in to your account and go to “Derivatives” and then “USDⓈ-M Futures”. Then, click on the “notification” button, “preference” and then “notification”. Here, you can set the funding fee trigger. The default trigger is 0.25%, meaning that Binance will send you a notification when the funding rate reaches 0.25%.

    Crypto funding rate trends

    Crypto funding rates are correlated with the price trend of the underlying asset, as seen from historical data. So the spot market generally dictates the funding rate.

    Binance historical funding rates
    Binance historical funding rates (Source: Binance)

    The above diagram shows the correlation between Binance’s funding rates and Bitcoin prices for the period from 20 December 2019 to 20 January 2020. As can be seen, the rise in funding rates corresponds to a Bitcoin price pump.

    Traders can see Binance’s historical funding rates here.

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  • 7 Ways to Profit During a Crypto Bear Market

    7 Ways to Profit During a Crypto Bear Market

    All financial markets experience different cycles and market conditions. Since crypto asset prices also go through prolonged periods of bullish and bearish movements, the crypto market is no exception. The most dreaded market phase for crypto traders and investors is a declining or bearish phase, especially one that sustains itself for a long time.

    General sentiments regarding the crypto and other financial markets are bleak during these periods, making many investors and crypto enthusiasts understandably worried. However, many traders still find ways to make money during unfavourable market conditions. To earn when the market is down, it is important to understand the concept of a bear market.

    Check out our video comparing the crypto bear market in 2018 vs 2022, and how you can still profit during this period of downward price trends:

    What Is a Crypto Bear Market?

    A bear or bearish market is a prolonged period characterized by falling prices of at least 20% across major crypto assets. Individual crypto assets may also be in a bear market if they experience a decline of 20% or more over an extended period. A bear market may occur due to widespread pessimism and negative market sentiment, as well as other internal or external factors. Additionally, a weak or slowing economy, pandemics, wars, and geopolitical crises are also characteristics that may cause a bear market. 

    7 Ways to Make Money and Profit in a Crypto Bear Market

    Even when the market is in an overall downtrend, the blockchain and DeFi sector offers various ways for crypto traders and investors to still emerge profitable and victorious. Here are a few lucrative options that crypto investors and traders can utilize to make money and remain afloat in a bearish market phase.

    Yield Farming

    Yield Farming is a cryptocurrency investment method that allows investors to earn interest and rewards on their crypto assets. With yield farming, investors lend their crypto assets to DeFi platforms that hold these assets in a liquidity pool for a specified period. These pools provide liquidity to decentralized finance platforms that use the funds and ensure that the depositors earn some interest over time.

    For those who are new, check out our video on the top yield farming mistakes all newbies make: 

    Crypto Staking

    Staking is the process of earning rewards by locking up funds on a blockchain. Although similar to yield farming, this process does not use tokens for loans. Instead, Proof-of-Stake (PoS) blockchains use staking to validate transactions on their networks.

    Learn more in our article: Proof of Stake explained. 

    Users who stake more tokens get higher priority to validate transactions and earn more funds. Earnings from asset staking vary between platforms and depend on the governance community in each case. Before getting involved in yield farming or staking, always do your own research and make sure the returns are sustainable, as many times, there are ludicrous and unsustainable offerings that result in users losing all of their funds. 

    Crypto Savings and Crypto Lending

    Savings and lending are good ways to make passive income from crypto during a bear market. These methods involve storing assets on a platform to earn simple interest on the deposits. Traders should remember that potential earnings mainly depend on the amount stored. Again, do your own research before allocating any capital to these types of platforms.

    Forks and Airdrops

    Altcoin forks and airdrops are also effective ways to make money in a bear market. A fork happens when users vote to diverge a blockchain and form another due to a material disagreement. This process leads to an airdrop where holders of the old token get the new tokens to participate in the forked blockchain. Depending on the value of the forked token, users can earn quite a bit by simply holding newly acquired tokens. (Modafinil)  

    Margin Trading

    One of the most common ways to make money in a down-trending market is margin trading. This method is simply the process of trading crypto assets with funds from brokers. Margin trading allows users to trade with more money than they have in their accounts, thereby increasing potential profit. Although margin trading is an effective way to earn in a bear market, this method is only recommended to experienced crypto traders, as you can lose the entirety of your initial capital if the market moves in the opposite direction of your call.

    Analyze Smaller DeFi Projects

    A new DeFi project may have a low valuation after launch, but show huge promise in the long run. Crypto enthusiasts who take the time to analyze and research these projects can likely find and profit from the right ones. Even in a bear market, crypto investors who get in early enough tend to make gains from the increase in the asset prices of these crypto projects.

    Dollar-Cost Averaging 

    One of the most effective ways to thrive in a bear market is to buy the dip. With dollar-cost averaging, investors buy assets at consistent intervals and properly observe market conditions before reinvesting. Since the cryptocurrency market’s volatility is unpredictable, it is nearly impossible to predict the lowest point before a reversal. Hence, dollar-cost averaging helps investors maximize profits by allowing them to buy at low points before the market becomes bullish. You lower your risk by lowering your potential downside and upside, but also allocating capital in a way where you will not only hit peaks and troughs.

    Next Steps

    Any crypto market condition has potential for profitability if you know how to play it right. The above strategies can help even novice crypto traders earn when the market is bearish. However, traders should note that their preferred strategy should depend on their risk tolerance and portfolio size. Traders should also learn to study the market to ensure that the chosen method will be effective at a particular time.

  • Crypto BEAR MARKET NOW (2022) VS 2018: Similarities & Differences

    Crypto BEAR MARKET NOW (2022) VS 2018: Similarities & Differences

    The crypto market, together with stock markets and the global economy in general, have been experiencing a significant drawdown for the past 6 months, leading to a confluence of factors ranging from high inflation, rate hikes, supply chain issues, energy crisis, to geopolitical instability. This combination packs a powerful punch for any risk-on markets, such as stocks and crypto, forcing retail and institutional investors to exit their capital from markets during these uncertain times.

    With Bitcoin currently at $20k, down 70% from its $69k ATH, and the total altcoin marketcap being down 72% from its ATH, it is hard to deny that we’ve entered a bear market. But one question remains – is this anything like the bear market of 2018 and will it last equally as long as the previous one? Let’s dissect the situation and understand if this time is truly different, or if this is just a small bump in the road before an accelerated bull market.

    Check out our video comparing the crypto bear market now (2022) and in 2018- and more importantly, how to STILL make money during this downturn:

    2018 Bear Market

    2017 saw the first true mass influx of retail interest into the crypto space. Bitcoin saw a rapid increase in price, everyone’s friend and grandma were kickstarting their own ICOs to attract funds, and regular companies added the blockchain keyword to their names to increase their share prices. 2017 was the wild west, as there was even less regulation than currently, and the space was rife with opportunists spawning scam projects to extract money from ignorant first-time crypto investors.

    But, as with any bubble, it eventually pops. The crypto space was heavily overheated, with investors throwing money at everything that moved, doing minimal to no due diligence, just to get on the crypto hype train. Come 2018, things were starting to cool down and people were beginning to feel the pain. In less than 6 months after the peak ICO craze, over 90% of all the projects were already dead, with many more to go down with them in the rest of the 18-month long bear market.

    At the peak of the market, a lot of FUD (fear, uncertainty and doubt) was beginning to circulate. Fear of regulation due to the prevalence of scams, and with China/Korea considering banning cryptocurrencies, things were not looking great for the crypto space. Right around the peak of the market, the Chicago Mercantile Exchange (CME) launched their Bitcoin futures product, which allowed institutional investors to get their hands dirty with Bitcoin. And, naturally, they did just that. With all of the FUD circulating and the market waiting to release a lot of pressure, institutions began shorting the market, creating an enormous sell pressure that brought BTC down to $7k, which kept grinding down to $3k till mid-2019.

    2022 Bear Market

    After Covid-19 hit, the market experienced a tiny two-month recession. As everyone was locked inside, demand dropped and supply shrunk as well. But once central banks began printing more money to help businesses and people via stimulus checks, many found themselves with a lot of extra cash and no way to spend it, so they turned to investing. After the March crash, the rest of 2020 saw the crypto market boom, calling it the “DeFi summer”, with BTC increasing in price by 400% by the end of the year. After that, it just kept on going. 2021 was the year of the NFTs and Metaverse, i.e. GameFi, with numerous projects sprouting up to capture some of the value amid all the hype.

    After reaching its peak in November 2021, the crypto market has kept on steadily grinding down. Those who had called the peak in November aptly understood that the markets were overheated, inflation was starting to get out of hand, and the only way for governments to keep that under control was to begin quantitative tightening through rate hikes. Unfortunately, many were still in denial about the onset of the bear market way into April, which has resulted in a lot of people holding bags that might or might not recover.

    Now the path forward seems clear. The US Federal Reserve’s hawkish monetary policy is causing markets a lot of necessary and unavoidable pain. Because the money printing since Covid-19 has been at such an unprecedented level, the Fed is finding it hard to slow down the inflation without causing a lot of damage. The result currently is a looming recession at the same time as inflation is still running rampant and driving up the prices of everything, all the while people’s incomes are stagnating and their expenses increasing.

    When is the Next Bull Cycle?

    At the moment, there are no clear signs of central banks reeling in their hawkish monetary policies. It might possibly take at least several months if not until the end of the year for the dust to settle, the bottom to come in, and for us to be ready for the next bull cycle once the Fed eases monetary restrictions. Continued geopolitical turbulence aside, the next bull cycle will certainly come, but it’s difficult to say what will be the narratives driving the rapid market expansion this time.

    The two most touted bull market catalysts are the long-awaited Bitcoin spot ETF and the Ethereum Merge, which will cause the Ethereum network to transition from its wasteful Proof-of-Work mechanism to Proof-of-Stake. However, as is common in life and in markets, the most obvious things tend not to be the ones to catalyze huge changes. Markets are irrational, and a confluence of new narratives that will be born only in 6 months might very well end up triggering the next bull run.

    How to Still Make Money During the Crypto Bear Market?

    With great pain come great opportunities, and this bear market is no exception. This is the time for learning, accumulating, and paying attention to the market. In our latest video about the current bear market, we outline a few strategies that you can use as an investor to maximize upside potential come next bull run:

    1) Dollar cost averaging (DCA) into your investments – instead of trying to catch the generational bottom and investing your whole capital in one go, better invest 20% of your capital at a time during a longer time period, so that way you are more likely to get a great average entry price and reap the profits in the future.

    2) Doing lots of research – fundamental analysis of projects is the best way to ensure you invest in projects that have a real potential, and this is the time to be doing just that. Many projects will die during this bear market, so it’s important to source trustworthy information and be critical of everything in order to position yourself properly during the next stage of growth.

    3) Diversify your portfolio – as we’ve seen in the past months, there’s no such thing as too big to fail in the crypto space. Instead of going all-in on one project, spreading risk across several projects will ensure your capital is better protected from a few bad investments.

     4) Shorting the market – this should not be practiced by anyone who doesn’t have experience trading, as without proper risk management things can get pretty ugly very fast. During a downtrend, a way to make money is by shorting an asset, which essentially means you’re betting on an asset to go down in value.

    Of course, none of this is financial advice, and we implore our readers to do their own research and never invest more than they are willing to lose. It’s a highly volatile market and not for the faint of heart.

  • STEPN Guide and Review

    STEPN Guide and Review

    STEPN is the most popular move-to-earn blockchain game in the crypto market this year after some significant adoption by the market and big moves with other major exchanges and well-known sneaker brands.

    Move-to-earn is a new way to earn money through gaming with the novelty that it rewards not only digital activity within a game or app, but also physical activity. In short, the more you move in the real world, the more you are rewarded in your digital app.

    STEPN has been crushing it lately after surpassing 300K daily active users (DAUs), receiving a strategic investment from the venture capital arm of Binance, and launching a unique collection of NFT sneakers on Binance NFT marketplace in partnership with sports brand ASICS.

    What is STEPN?

    STEPN is a move-to-earn health and fitness app with game elements built on Solana. Users equipped with sneaker NFTs can run and walk outdoors to earn tokens and NFT rewards. The funds earned can either be used to increase earnings in the app or can be withdrawn and sold. The mobile app has a built-in wallet, swap, marketplace, and rental system that allows non-crypto users to onboard.

    How does STEPN work?

    Anybody can earn tokens and NFTs in STEPN by downloading an app, buying NFT sneakers, and completing various forms of exercise. Similar to how Bitcoin mining works, users in STEPN have to prove they have physically worked out, at the cost of their own time and energy. This is validated by the app’s anti-cheating mechanics using GPS and machine-learning technology. 

    The tokens and NFTs are then minted to users’ wallets from the people, not from the game developer FindSatoshi Lab, known for its work on cryptocurrency wallet Solwallet. In this way, people can trade their tokens and NFTs 100% peer-to-peer and over time. STEPN has created an ecosystem where the value of tokens and NFTs is based on supply and demand.

    STEPN tokens: GMT and GST

    There are two types of tokens available to players, GMT (total supply of 6 billion) and GST (unlimited supply). GMT is a management token that allows users to increase their income. GST is an in-game token that users receive for in-game activity.

    To create a balanced token ecosystem, the developers have decided not to limit the GMT governance token earning to a small group of people. Instead, they have made GMT and GST broadly accessible to ensure balance in the mining of these two tokens.

    Since many GameFi projects with a similar dual-token economy have tended not to thrive, the question is raised about whether GST, with its unlimited supply, will go into a death spiral. STEPN’s model addresses this by making GST earning irrelevant at a higher level. As people approach the higher levels, they are presented with the option to choose which token to earn, and they would naturally want to earn the limited supply of GMT. 

    This will get amplified over time as more GMT is burned and more GMT use cases are released. This should reduce the GST token supply enough to balance the token value. If too many people are mining GMT, they will earn less than what they can with GST, so they will switch to earning GST. This will reduce the competition for earning GMT, and, in turn, make GMT mining profitable again.

    Getting started with STEPN

    To get started with STEPN, you must first download the app to your smartphone via Google Play or Apple Store. Then, following the on-screen instructions, you will need to create an account and receive an activation code. 

    You will be able to use the app fully once you have purchased your NFT sneakers from the in-app STEPN shop. Choose your sneakers based on your abilities. Once you have purchased the sneakers, open the game and start walking or running. You will start earning immediately.

    How to join STEPN: Step-by-step guide

    1. Download the App

    First, you have to install the app on your smartphone. Depending on the model of your phone, you can do this either from the App Store or from Google Play.

    2. Create an Account

    After launching the app, you will need to enter your email address, to which you will receive a registration confirmation code. Enter your email address and press the ‘Send Code’ button. A code will be sent to your email address, and you will need to enter it in the corresponding field.

    3. Obtain Activation Code

    You then need to obtain an app activation code. To obtain the activation code, register in the STEPN community on one of the official social networks. Choose the social network that suits you best (Twitter, Telegram, Discord, etc.) and proceed according to the on-screen prompts. An activation code can also be received from a friend via invitation or bought from another user.

    Once you have received the activation code, the main app screen will open. Click on the ‘Get activation code’ button. After you have entered your activation code, the app will open and the tutorial will start. Several screens will explain to you how to use the app.

    4. Create a Crypto Wallet

    You then need to create a crypto wallet in the STEPN app. Click on the wallet image in the top-right corner of the app. This will start the process of creating a crypto wallet, which will take a couple of minutes. While creating the wallet, you will be shown a secret phrase that you need to write down and keep in a safe place. Once the crypto wallet has been created, you will be taken back to the main app screen.

    5. Start the Game

    In the top-right corner, the token column will show zeros. To start the game, you need to deposit Solana (SOL) tokens into the crypto wallet you just created, in the amount that will allow you to purchase an NFT in the form of a sneaker. SOL can be bought on almost any major CEX or DEX.

    6. Buy NFT Sneakers

    TIP: Before you buy sneakers in STEPN, open the app and run for 10 minutes in running mode without sneakers. This is so that you can find the right type of sneaker for you. NFT sneakers are purchased in the shop. After buying the sneakers, wait until 25% of the energy has accumulated (approximately 6 hours) and then start the game. You are now ready to move-to-earn!

    Playing and Moving to Earn

    STEPN currently has solo mode only, in which users receive GST tokens as a reward for moving in the real world. This consumes virtual energy at a rate of 1 unit per 5 minutes of movement. All of these processes are only triggered after the purchase of NFT trainers. If the energy is at zero, no tokens are earned. 

    GST tokens, and subsequently GMT, are paid out depending on the following factors:

    • The level and attributes of NFT sneakers – more efficient sneakers cost more. Up until Level 29, users can only earn GST, and from Level 30 onwards, they can switch to earning GMT if they wish.
    • Sneaker comfort parameter – the higher it is, the more tokens are earned every minute.
    • Running speed – it is necessary to maintain the recommended speed range for the sneaker. If you deviate too much from it, earnings will be reduced by up to 90%.

    Marathon and background modes are set to be added later. Marathon mode will be an entirely new playstyle and is aimed for release towards the end of 2022. Background mode will be added when the STEPN team feels the time is right to approach non-crypto users.

    The Importance of Energy

    Energy plays an important role in earning tokens in STEPN. As soon as you run out of energy, your earnings will stop. Only when energy is available will your movement be rewarded. The amount of energy determines how many tokens you can earn for walking and running. 

    To increase the amount of energy you have, you can buy more NFT sneakers or get hold of rarer ones. The more NFT sneakers you own in your inventory, the more energy they will automatically generate. Higher levels and rarity sneakers will give you more energy.

    Strengths of STEPN

    One of STEPN’s biggest strengths in the current market is the successful combination and implementation of GameFi and sports. This could be seen as a clear advantage over any competition as many crypto-native builders don’t have the connections or knowledge to replicate STEPN’s GPS technology and machine-learning anti-cheating mechanics. 

    Because the health concept of the game and its everyday practicality is relatively simple compared to other games and apps in crypto, STEPN is a prime candidate for mainstream adoption.

    Weaknesses of STEPN

    There are still quite large barriers to entry for the average person. The registration process is too complicated, and to start playing, new users need to first learn how to open and fund a crypto wallet and buy an NFT item. For a newbie, this is not as straightforward as it should be.

    NFTs also cost between 2.5 and 10 SOL, and way upwards of $100 if you want the best sneakers. This means there is an element of ‘pay-to-earn’ about STEPN. However, at the moment, the return on investment (ROI) is in the region of a few weeks, which is not bad at all.

    Conclusion

    Making money while keeping healthy is a win-win, and as a sports GameFi product, STEPN has struck a decent balance between game elements that are not too rich and complex to stop non-gamers from entering, and sports elements that are not too difficult to stop non-athletic people from trying it out. 

    The tokenomics also create value for both users and the platform. As long as the concept remains simple and participating remains profitable for the average user, STEPN should continue its impressive adoption rate.

    For more information on STEPN, follow their official channels:

    Website | Twitter | Telegram | Discord | Reddit | Medium | Email

  • The Pros and Cons of Stablecoins: Why You Need To Know How They Work

    The Pros and Cons of Stablecoins: Why You Need To Know How They Work

    Stablecoins are under the microscope right now following the collapse of Luna and UST, the stablecoin of the Terra ecosystem.

    In this article, we look at the history of stablecoins, its pros and cons, why they are needed, and what are the risks are of utilizing them.

    What is a Stablecoin?

    A stablecoin is a cryptocurrency that maintains a fixed value because it is backed by reserves of other assets such as fiat currencies, securities, gold or precious metals, property, or any other assets as collateral.

    There are four main types of stablecoins: 

    • Fiat-Collateralized: Fiat-backed stablecoins are backed by real-world currencies such as US Dollars or British Pounds at a 1:1 ratio.
    • Commodity-Backed: Backed by precious commodities like gold, platinum, or real estate.
    • Crypto-Backed: Backed by other cryptocurrencies which are kept as a reserve to ensure price stability in the event of price fluctuations. Smart contracts can also be coded to ensure no trust is needed in third parties.
    • Algorithmic: These involve adjustments in the algorithm for controlling the supply and demand of stablecoins, usually in the form of two tokens: one a stablecoin and the other a cryptocurrency that backs the stablecoin.

    Cryptocurrencies are decentralized and not controlled by centralized entities such as governments or regulatory bodies. They operate on supply-and-demand principles in a free market and can be volatile in nature. 

    Simply put, stablecoins allow investors and traders to ‘cash out’ of risky investments into another crypto coin that will not fluctuate wildly in value during times of market volatility.

    History of Stablecoins

    Stablecoins actually have a very long history, having been around since 2014 with BitUSD. BitUSD was created in July 2014 backed by the $BTS token and created by Dan Larimer and Charles Hoskinson, both pioneers in the cryptocurrency who went on to create EOS and Cardano ($ADA), respectively.

    However, even the world’s first stablecoin was not without its issues. In late 2018, BitUSD lost its peg to the US Dollar, resulting in huge criticism from the cryptocurrency community. BitUSD is no longer commonly used, and many cryptocurrency exchanges no longer support this stablecoin.

    The next stablecoin to be launched was NuBits in September 2014 and was functional for 3 years. Eventually, this stablecoin also fell- suffering 2 major crashes during which the peg was broken for an extended period of time. The first of these crashes was in 2016 when NuBits was depegged from the US Dollar for 3 months. This was likely because holders of NuBits suddenly sold their substantial holdings for Bitcoin, resulting in NuBits being unable to handle the large volumes of sell-offs and losing its peg. Surprisingly, after the 2016 crash, the marketcap of NuBits shot up by 1,500%. This was caused by people buying millions worth of NuBits in late December 2017 owing to concerns about the stability of Bitcoin, whilst the NuBits team was unable to print new coins to keep up with the demand, thereby driving up prices.

    The second, and final major crash suffered by NuBits was in March 2018 which was caused by insufficient reserves of the coin, meaning that the NuBits team were unable to protect the coin when there was a dip in demand. Of course, large cryptocurrency holders immediately noticed the drop in NuBits prices and panic sold their positions, causing an even greater slide in price.

    After the second NuBits depeg, the stablecoin had lost credibility with cryptocurrency investors. Some holders even threatened legal action against the NuBits team or went into Tether ($USDT) and/or TrueUSD instead.

    Tether $USDT however has also weathered a few storms of its own, facing legal battles with the Securities and Exchange Commission (SEC), which also shook the confidence of the market. The legal action was eventually settled in 2021 with the parent company of Tether paying nearly US$60 million.

    Despite this, cryptocurrency keeps evolving with each passing year as new innovations that were once met with speculation and distrust eventually become trusted by the market. Today there are many other stablecoin options out there such as USD Coin (USDC), Binance USD (BUSD), MakerDAO (DAI), Paxos Standard (PAX), and Gemini Dollar (GUSD) that provide alternatives to USDT. 

    Pros of Stablecoins

    There are several reasons and numerous benefits to using stablecoins. In general, they are simply faster, cheaper, transparent, borderless, and programmable compared to fiat currencies. Some more benefits are listed below.

    1. Stablecoins allow a quicker and easier way for investors to enter the crypto market by bridging fiat into stablecoins, which act like fiat currencies on exchanges.
    1. Stablecoins are more efficient than fiat because they have the digital properties of other crypto tokens and can be moved around quicker and more efficiently than fiat money.
    1. Stablecoins can be held as capital in non-custodial wallets such as Metamask, thus removing the need for third parties to intermediate.
    1. Stablecoins allow for quicker, immediate peer-to-peer payments abroad that are semi-anonymous with much lower fees than fiat currencies.
    1. Stablecoins can be used for holding, trading, borrowing, and lending abroad. When fiat-related regulatory processes are involved, even better.
    1. Stablecoins can be staked to earn a higher yield than traditional finance in DeFi applications. When adding liquidity to protocols, they also minimize the risk of impermanent loss due to their price stability.
    1. Blockchain data and tracking allows for a more transparent view of the market, giving investors more information on liquidity flows and thus greater decision-making power.
    1. Many sectors of the economy and the unbanked population are benefiting from the use of stablecoins in remittance, escrow, payroll, settlement, and alternative banking that is self-custodial, cutting out intermediaries.

    Cons of Stablecoins

    Stablecoins used to be more controversial in the earlier days of crypto but have garnered more regulatory approval in recent years, minimizing many of the negative aspects.

    1. Stablecoins usually require trust in a third party to ensure the coins are backed by the stated assets, which also means external audits are needed to ensure assets are accounted for.
    1. There are lower yields on stablecoins in DeFi applications than on regular cryptos, however, these yields are still significantly higher than the interest rates offered by traditional banks.
    1. Stablecoins utilized in DeFi applications are subject to the usual risks involved with unregulated cryptocurrency projects. The TerraLuna disaster was a perfect example of an extreme worst-case scenario for an algorithmic stablecoin.
    1. Trial and error. Due to the relative infancy of stablecoins and the experimental nature of new technologies within crypto, there is still a risk when getting involved with newer projects or protocols.
    1. Regulatory scrutiny. As the stablecoin market keeps growing and adding billions of dollars in value to the crypto market, it will generate increased interest from authorities. This can also be seen as a positive.

    Conclusion

    Stablecoins and their rapid proliferation across all blockchain protocols have brought more flexibility and adoption to the cryptocurrency industry. They are now embedded in the fabric of the market and are here to stay. 

    The onus remains on the individual investor to do your own research (DYOR) when deciding which stablecoin to hold. Find out who created it, whether it’s a trusted centralized business or a decentralized protocol managed by smart contracts. All the options are open to you when it comes to the safer management of risk in the crypto market.

  • Stablecoin Comparisons: Which is the Best?

    Stablecoin Comparisons: Which is the Best?

    Table of contents

    One major question all new cryptocurrency investors ask is how to actually spend their cryptocurrencies. Unfortunately, cryptocurrency is just not as widely accepted as fiat currencies. Cryptocurrencies are also subject to huge price fluctuations and volatility. Therefore, to “lock in” the price of your cryptocurrencies and as a springboard to cashing out crypto to fiat, many have converted their cryptocurrencies to stablecoins instead. This allows one to keep their dollar-pegged coins in exchanges or cold/hot wallets, so when the moment to jump back into the bull run comes, they can do so within minutes without having to deal with fiat on-ramps. Alternatively, to easily convert their stablecoins to fiat currencies for spending. 

    Most have considered stablecoins to be a safe means of preserving their capital without experiencing volatility and having to leave the crypto ecosystem. After all, they’re… stable, right?

    In most cases, they have been, but the most recent collapse of one of the largest and well-respected stablecoins, terraUSD (UST), and other less known ones, like neutrino USD (USDN) and DEI, has led people to question the stability of all stablecoins. But is this warranted? Isn’t there a bit more nuance to the mechanisms by which a coin retains its dollar or other fiat currency peg, each with their own risks and advantages?

    Although a seemingly straightforward idea, stablecoins can be quite tricky to unpack and analyze, especially when talking about non-collateralized algorithmic stablecoins, which sound too good to be true, and in some cases, are. With this in mind, let’s take a look at stablecoins, what kinds are out there, how well they are doing, and what makes them tick.

    Check out our latest video- Stablecoins: Are they safe? ($UST, $USDT, $USDC, $BUSD)

    Stablecoins: Are they safe? ($UST, $USDT, $USDC, $BUSD)

    Stablecoins – What Are They and How Are They Different?

    Stablecoins are cryptocurrencies that are pegged 1:1 to the value of a fiat currency, meaning that, for example, every 1 USDT (USD Tether, the biggest market cap stablecoin) is worth 1 US Dollar. There are numerous stablecoins in circulation, with different coins having different mechanisms for collateralizing their stablecoins.

    The most commonly used feature to categorize stablecoins is by looking at how each of them backs their tokens, e.g. their collateral/reserves. By doing that, we can focus on using more narrow criteria for evaluating and comparing stablecoins based on the risks and advantages that stem from the chosen collateralization mechanism. Broadly speaking, there are three main types of stablecoins: Fiat-collaterized stablecoins, crypto-collaterized stablecoins and algorithmic stablecoins. 

    Fiat-collateralized Stablecoins

    By far the most popular type, fiat-collateralized stablecoins occupy the top 3 spots (USDT, USDC, BUSD) among stablecoins by market cap, accounting for roughly 94% of the total ~$155 billion stablecoin supply.

    (Total Stablecoin Supply)

    Their working principle is the most straightforward to understand. Each of these coins is backed by a combination of real USD cash reserves, US Treasury Bills, and commercial papers (liquid short-term debt issued by companies).

    Crypto-collateralized Stablecoins

    Similar to fiat-backed stablecoins, crypto-backed stablecoins use cryptocurrencies as collateral, and smart contracts and, typically, governance tokens to monitor price stability. Due to the volatile nature of cryptocurrencies, crypto-backed stablecoins are over-collateralized (150% for DAI, for example) to account for periods in the market when prices of the collateral assets keep going down. Learn more about DAI.

    Compared to fiat-backed stablecoins, they’ve witnessed a much slower rate of adoption. However, based on data, it does seem that they are slowly starting to gain momentum and dominance over the past years, as people begin to develop trust in the previously experimental mechanisms, which is to be expected.

    There are also hybrid collateral tokens such as Reserve Tokens (RSV) that are backed by both digital and fiat assets.

    (Share of Total Stablecoin Supply)

    Algorithmic Stablecoins

    By far the most technically complex and technologically least mature, algorithmic stablecoins rely on on-chain algorithms to handle changes in supply and demand between the stablecoins and their sister tokens that back them by burning and minting them in both directions through a process called seigniorage, to maintain a dollar peg. This, however, only works while there isn’t a strong downward pressure on the peg that keeps stressing the mechanism, which can lead to a downward death spiral during which both tokens keep losing value as users keep panic selling at the same time as the algorithm tries to stabilize the price. Although not fully collapsed, neutrinoUSD and its Waves protocol have been experiencing extreme turbulence for the better part of two months, making users lose confidence in its stability, especially as its working mechanism is very similar to that of UST.

    On the less extreme side of algo-stables lie hybrid stablecoins, or fractional-algorithmic stablecoins, such as FRAX, which is partly backed by collateral, and partly algorithmically by adjusting the collateral based on the deviation of FRAX from the $1 peg.

    Learn more with our Ultimate Guide to Algorithmic Stablecoins:

    https://www.youtube.com/watch?v=hdmotWPNVdQ

    Criteria for Comparing Stablecoins

    Decentralization

    The impact of regional regulations can be a risk many would not find appealing. It’s completely reasonable to expect that the industry would be capable of creating largely decentralized stablecoins that are collateralized by one or more decentralized cryptocurrencies, and governed by a DAO. Such is the nature of MakerDAO and its DAI stablecoin, which has shown its peg strength throughout this year and especially during the most recent catastrophic UST collapse. There is a small caveat, however. 

    The largest crypto-asset backed stablecoin with a $6.5 billion market cap, DAI, is still heavily backed by the second largest market cap stablecoin, USDC, which itself is backed by fiat reserves, calling into question whether it truly is as decentralized as it purports itself to be. The reality is not as grim as it might seem. Even though USDC and USDP (another fiat-backed stablecoin) comprise 28.1% of the total DAI collateral, ETH and WBTC (Wrapped BTC) boast an impressive 58.6% collateral, tipping the collateralization balance in favour of decentralized digital currencies instead of centralized stablecoins. In addition, the Maker platform with the MKR and DAI tokens, together with all of its smart contracts, lives on the Ethereum blockchain, making it truly trustless and decentralized, even if a good portion of the collateral is not.

    (DAI collateralization)

    On the other hand, the decentralization of all stablecoins might not be necessary, or even desirable, as properly regulated stablecoins almost by definition require a legal entity or a consortium of entities with exposure to major governmental bodies (especially in the US) to be behind the stablecoins, so that there is little doubt about who is responsible for ensuring a full fiat backing of their stablecoins. However, this would imply heavy centralization of control over the stablecoin supply and the general mechanisms for issuance, governance, and, crucially, potential censorship. 

    A centralized stablecoin is a double-edged sword. On one hand, it gives unprecedented  power over a vast supply of stablecoins that a decentralization-focused industry heavily relies on to do daily business. On the other hand, it allows for companies like Binance, who are behind the popular BUSD stablecoin, to prioritize user safety and regulatory compliance, giving users peace of mind about the safety of their assets.

    Thus, a strong argument can be made to safely onboard millions of new users through reasonably regulated stablecoins. It’s important for this industry to appreciate the need to offer a wide range of stablecoin alternatives, from centralized to decentralized, for users with different risk appetites and technical competencies in order to accelerate crypto adoption worldwide.

    Compliance & Transparency

    Closely tied with the level of decentralization of a stablecoin, regulatory compliance and transparency are absolutely crucial for companies who are backing their coins with cash reserves, and who desire to find strong and growing support by institutions, companies, and investors looking to enter the space, but who have been apprehensive to do so due to concerns about a potential inability to redeem their tokens for dollars.

    It’s important to note that regulatory compliance is largely a concern for stablecoins operated by corporations, as they are the ones operating mostly behind closed doors, with most of the details about their inner workings, decisions, and collateralization mechanisms being hidden from the end-users and legislators. In such situations, it is more than reasonable to expect a regulatory body to force at least some oversight over how exactly these companies are operating their stablecoins and whether they do possess the collateral they claim to have.

    The same can’t be said about open-source, decentralized governance-powered, blockchain-native, crypto asset-backed, and over-collateralized stablecoins that are being operated completely out in the open, with every decision, piece of code, and capital relocation in smart contract escrow accounts being registered on-chain. For coins such as DAI, compliance and transparency are baked into the protocol, and it can be reasonably argued that the necessity for any kind of regulatory oversight is moot, as the community and the free market cryptoeconomic pressures have organically grown a robust and freely auditable stablecoin that’s fully backed by digital currencies.

    For fiat-backed currencies, the two large-cap extremes in the range of transparency and compliance are BUSD and USDT. While BUSD has been extensively cooperating with the New York State Department of Financial Services (NYFDS), and showing that every BUSD is backed by an equivalent amount of cash, USDT has been under significant scrutiny over the past years regarding its executives and the USDT backing. These allegations, combined with the lack of transparency by Tether, have made many worry whether USDT is a house of cards about to crumble as the Chinese real estate bubble begins to pop.

    Financial Sustainability

    In addition to the existential risks posed by the type of collateral chosen for stablecoin reserves, another source of risk that can be analyzed for a project is its cashflow. Changes in the cashflow of a protocol can offer clues about the health of the ecosystem and its ability to withstand market shocks.

    Understanding how a stablecoin protocol spends and, most importantly, earns its money, is key to making predictions about the long term sustainability of such projects. Without proper long term revenue models, protocols are left to come up with highly appealing but unsustainable practices such as incredibly high yields on stablecoin deposits (such as UST had) or very low to non-existent trading fees to make it appealing for users to use that stablecoin as their dominant medium of exchange. These kinds of practices sooner or later come back to bite them in the ass, as there is a very high probability that the high yields and low fees are paid for not from organic revenues, but rather from alternative revenue sources (as is the case for Binance), or from project’s treasury/VC investment money, in hopes that they would be able to subsidize the attractive rates for long enough to reach a critical mass of users to then eventually either lower the yields and increase the fees, or simply keep running a ponzi-like operation for as long as possible.

    Risks are High, always DYOR (Do Your Own Research)

    If something in crypto sounds too good to be true, it very likely is. The most recent example of this was the Anchor Protocol’s 19.5% yield for UST deposits, which should’ve been a huge red flag, and yet many, many individuals chose to deposit their life savings into a supposedly stable UST in hopes of an unsustainably high APY.

    For a $50 billion project to go down to virtually nothing in a matter of weeks is nothing short of astonishing, and should serve us all as a warning to do our due diligence thoroughly, and ask uncomfortable questions, even if the whole market seems to be fully on-board with a project. 

    As the saying goes, “Follow the money.” If a protocol is promising unbelievable returns, if the company behind a stablecoin year after year refuses to prove their fiat reserves, and if a algorithmic stablecoin seems to have a fishy peg stabilizing mechanism that can only work in an up-only environment, then you should exercise caution. And as with everything, whether it be cryptocurrencies or stocks etc, ask yourself if you have really fully done your research and never put in more money than you can afford to lose. 

  • Top 7 Countries for Cryptocurrency Investors (Tax-Free)

    Top 7 Countries for Cryptocurrency Investors (Tax-Free)

    Doing your taxes on your cryptocurrency trades has become a necessary burden for many as major nations continue to implement regulations on the industry, and this is actually a positive thing for global adoption. Huge nations such as the United States are currently looking to introduce stricter regulations for crypto and have already been taxing crypto profits. Therefore, to avoid unwanted meetings with the IRS, American investors are having to play by the old rules.

    But if that’s not something you’re into (long live financial freedom!) or you’re a crypto maximalist, the good news is there are several places in the world that might present better options for you.

    This article highlights seven countries around the world that are pro-crypto and some that will even allow you to trade and earn crypto income tax-free. Here’s our video comparing the top best countries for crypto investors. 

    1. Portugal
    • No capital gains tax on crypto
    • No personal income tax on crypto received

    Portugal is one of the most crypto-friendly countries in the world after establishing a Digital Transitional Action Plan in April 2020 to promote decentralization. The country experienced hyperinflation in the early 1990s which almost drove companies to bankruptcy, so it is no surprise the Portuguese people have shown trust towards crypto.

    If you’re making any capital gains from purchasing or selling cryptocurrencies you do not have to pay any taxes, nor is there any income tax on payments received in crypto. If you don’t hold an EU passport then you can invest 350,000 euros in funds in the country for five years to become eligible for citizenship via the Golden Visa Scheme. The best part is you’ll only need to spend seven days in Portugal per year, meaning you don’t have to permanently relocate.

    2. Bermuda

    • No income tax at all
    • No capital gains tax on crypto 

    As an example of Bermuda’s crypto-friendly nature, we only need to look at the Bitcoin ETF that was approved in late 2020 after years of unsuccessful attempts to launch in the United States. The Bermuda Stock Exchange approved Hashtag’s Nasdaq crypto ETF making it one of the first of its kind and proving that the country is likely to continue to be forward-thinking regarding crypto.

    It’s fairly easy to obtain residency in Bermuda as long as you have sufficient income. At least $2.5 million must be invested into real estate, businesses, or bonds in the country in return for a passport.

    3. Malta

    • No income or capital gains tax on long-term crypto investments
    • 35% income tax on crypto trading

    Malta is a southern European island in the Mediterranean Sea that has been using crypto for the longest time. Crypto traders receive 35 per cent in income tax as it is viewed as the same as stock trading by legal definition, but on the plus side, there is no income or capital gains tax on long-term investments in digital currencies. So if you’re a long-term hodler you would love Malta, but not so much if you’re a day trader. 

    If you’re not an EU citizen and want to become one you can buy Maltese citizenship and receive a passport in about one-and-a-half years at a cost of around $1 million dollars. This is more for long-term players who really want to cash out their crypto tax-free.

    4. Singapore

    • No capital gains tax on crypto
    • No existing crypto funds subject to taxation

    Singapore already enjoys the reputation of being one of the most business-friendly places on the globe and is slowly emerging as a safe haven for crypto investors as well. The country’s central bank believes the crypto ecosystem should be monitored to prevent money laundering and other illegal activities, however, also insists innovation should not be stifled. Singapore is known as the fintech hub of Asia as residents and companies do not have to pay any capital gains tax nor are there any existing funds subject to taxation. 

    Residency in Singapore is easy for students, who just need to study there for two years and pass a government exam, but the requirement is much higher for their investor program – at least 2.5 million Singaporean dollars (roughly US$1.8 million) must be invested into new businesses or funds.

    5. Switzerland

    • No capital gains tax on crypto
    • Bitcoin is legal tender in some regions

    Swiss banks were the first in the world to offer crypto companies business accounts in 2018 after recognizing that banking channels would help to eliminate fraud and encourage legitimate businesses in Switzerland. Crypto is classified as an asset and Bitcoin is recognized as legal tender in some regions so the narrative for crypto is generally positive. The Swiss don’t see crypto as a threat to their fiat currency.

    If you trade or hold any crypto as an investment in your own account and qualify as an individual trader you will not be liable for any capital gains taxes. Residency in the country is a bit tricky in comparison to other countries – you must be under the age of 55 and need to invest at least one million Swiss Francs in a way that stimulates new technology developments in the region.

    6. El Salvador

    • No income or capital gains tax on Bitcoin
    • Bitcoin recognized as legal tender
    • Building world’s first ‘Bitcoin City’

    El Salvador made mainstream media headlines and is the undisputed king when it comes to crypto-friendly regulation after Bitcoin was recognized as legal tender in 2021. Consequently, the country has no income tax or capital gains tax on Bitcoin and plans to maintain its status as a crypto hub by building the world’s first ‘Bitcoin City’.

    In the future it might also be possible to buy an extra passport and a new nationality with crypto. The law hasn’t been confirmed yet but ever since Bitcoin became legal tender in the country El Salvador has continued to accumulate and now holds more than 1,800 Bitcoin as they want to continue to build up their Bitcoin reserves. Do not be surprised to one day see El Salvador offering citizenship in exchange for crypto investments.

    7. St. Kitts & Nevis

    • No capital gains tax at all
    • Buy a passport for $150k or BTC equivalent
    • Move freely between Caribbean Union countries

    St. Kitts & Nevis is an island in the West Indies that has welcomed digital assets with open arms and implemented legislation to make crypto transactions easier under its Virtual Asset Bill of 2020. You can use crypto to buy a passport to this tax haven and the best part is you don’t even have to land in the country to get the passport. A passport costs about $150,000 or the equivalent in Bitcoin and you can get it in about four months.

    There is no capital gains tax in the country at all and local banks work happily with crypto investors. The island nation has Bitcoin ATMs placed throughout the country and you can live in any other Caribbean countries that are also part of the Caribbean Union.

    Conclusion

    At the end of the day there are still many countries that consider crypto to be a threat to their sovereignty yet each day more and more nations are realizing the benefits and possibilities of welcoming the innovation of blockchain and crypto. The treatment of digital assets varies depending on each country’s financial regulations and procedures, which is why it’s essential to do your own research and consult a tax advisor before deciding to immigrate.