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For traders, volatility is a double-edged sword that can lead to vast riches or immense losses. Crypto traders are particularly susceptible to volatility due to the low liquidity in some projects, and the high concentration of some cryptocurrencies in the hands of individual whales.
2022 could prove to be one of the most volatile years since the inception of Bitcoin and the crypto industry. The U.S. Federal Reserves and its Chairman Jerome Powell have become hawkish as rising inflation threatens to trigger turmoil in the global economy.
U.S. financial institutions have hinted at the possibility of increasing interest rates while its asset purchase program tapers. This reduction in liquidity across global markets has created the perfect conditions for a risk-on environment to bloom.
Crypto traders and enthusiasts are aware that Bitcoin, Ethereum, and other cryptocurrencies are risky assets despite their amazing gains. A reduction in global liquidity has resulted in downward price action since Q4 2021 and continues into the beginning of 2022.
Bitcoin alone has already experienced a correction of almost 50% as its price trends closer to the $30,000 mark. Thus, a hawkish FED could contribute with more volatility as institutions de-risk their crypto positions and liquidity leaves the market.
In addition, the swing in sentiment, as measured by the Fear & Greed, seems poised to onboard new users. Historically, new crypto traders tend to contribute to a volatile market as they often take riskier positions and fail to manage their risk.
As BTC, ETH, and other cryptocurrencies bounce back from their lows, these traders could enter the crypto market for a quick profit, mostly using leveraged futures contracts. Their positions, lack of conviction, and inexperience leave the market open for a liquidation cascade or sudden moves back into previous lows.
Phemex Lets You Protect Your Positions As You Benefit From A Bearish Market
In March 2020, a day forever engraved into the crypto market’s history as “Black Thursday”, traders saw Bitcoin, Ethereum, and altcoins plunge below critical support. A year later, in 2021, the market saw something similar as major cryptocurrencies lost over 50% of their value in a matter of days.
In that sense, leading crypto exchange Phemex recently disclosed a new product that will allow traders to benefit from downside price action. The platform offers as much as 100x in leverage perpetual future contracts, which now will be available with their inverse ETH/USD contract.
The products let traders diversify their trading strategies as they can profit from bearish movements and market volatility. In that sense, any short-term position will be hedged against sudden moves in the market and spikes in volatility, as funding rates make little impact on the trader’s position.
In addition, the platform has one of the best security mechanisms in the crypto industry. So in addition to protection against volatility, traders can also avoid bad actors. Phemex security mechanism consists of 4 major components: wallet, deposits and withdrawals, users accounts, and their trading engine safety.
Unlike some of the other platforms in the industry, the Phemex security system has never been breached and its users have never lost their funds due to hacks. Its combination of trading products, liquidity, and security make Phemex an ideal choice to trade on under any market condition.