Hedging Your Crypto Portfolio With Real-World Assets

B1HC...QpyA

16 Sept 2024

Risk & Reward
The most powerful aspect of the Cryptocurrency market is volatility. However, as all Crypto investors have discovered, there is also a downside. A downside that can be incredibly harsh and even lengthy at times. A multi-year bear market can be a daunting period, especially if your portfolio is down more than 90% and is perhaps headed lower. This is usually how bear markets tend to play out for the majority of market participants.
For the majority of investors, little attention is given to risk management and diversification. Choosing to hedge your Crypto portfolio will incorporate both of these practices, especially, diversification. However, diversifying into alternative Crypto assets doesn’t help much as the entire benchmark goes down with the ship. Unlike bull markets where certain assets can buck the trend, a bear market drags everyone into the cave.
There’s no hiding away in a bear market. The bear takes no prisoners unless you have exposure to dollar-denominated real-world assets such as stablecoins, tokenized real estate, and others. During the first peak in 2021, I moved almost half of my portfolio into stablecoins. This was when Bitcoin was trading at $65K just before the China mining ban. As a result, I was largely unaffected.
An Income Generating Hedge
What makes hedging with RWA so attractive is the ability to earn and generate yield. This makes this idea a lot more profitable. The average Crypto investor doesn’t want to be exposed to fiat because they will miss out on gains. On the other hand, stablecoins can generate yield while simultaneously providing a hedge for your portfolio. Generating yield does incur some risks but that’s life. Imagine a scenario in a life void of risk.
A relationship, a career… they all come packaged with risk. There is no “safe” environment on planet Earth. However, there are more risk-averse approaches. Regarding stablecoins, HBD is my first option as it offers investors a 15% APR. This is an excellent return, considering the level of safety and easy access. Investors hold their private keys and can gain access to their assets within 72 hours.
BetFury also offers amazing yields on stablecoins. Investors can gain access to 60% APR on USDT. Unlike Celsius, BlockFi, and others, BetFury sailed through 2022 without issues. For this reason, I consider BetFury a relatively safe and established entity. However, past performance is not indicative of future performance, so always DYOR.
Tokenized real estate can offer investors 10% to 20% per year in the form of rental income and market appreciation. Being able to earn yield via alternative on-chain assets makes tokenization a lot more attractive to the average Crypto investor, provided they know how to generate yield via tokenized and DeFi channels. Lofty.ai is one of the best tokenized real estate platforms I have encountered.
This is still a new and innovative space, so, once again, research any opportunities or entities mentioned in this article. This is not an endorsement of any of these services but rather services I have found beneficial. Once again, HBD offers the non-custodial investor one of the best opportunities regarding risk/reward ratios. As I have mentioned, Crypto portfolios should have a 20% allocation to stablecoins/RWA.
This is during a bull market. At the onset of a bear market, I advocate translating a majority of an altcoin portfolio into stablecoins and other relatively stable real-world assets. The compounding of yield during a multi-year bear market enhances your portfolio. When the time comes to re-enter the Crypto market, investors can purchase additional assets, and as a result, grow their portfolio.

Free Avalanche (NEW)

Final Thoughts
Diversification needs to exist within diversification. In other words, spreading the risk even amongst stable investments, according to risk profiling. Even though BetFury has proven itself, it is inherently more risky than a DeFi-based opportunity such as HBD. This was a common mistake of the Celsius era… investors put their entire savings and portfolios into Celsius so they could earn yield. Diversification remains key! See you next time!

Earn Free LEO & HIVE

Disclaimer
First of all, I am not a financial advisor. All information provided on this website is strictly my own opinion and not financial advice. I do make use of affiliate links. Purchasing or interacting with any third-party company could result in me receiving a commission. In some instances, utilizing an affiliate link can also result in a bonus or discount.
This article was first published on Sapphire Crypto.