A recession is defined as a decline in GDP over two consecutive quarters, but it's not as simple as knowing that an economy is in recession. Companies and analysts may see GDP decline for a period of time, but that doesn't necessarily mean it's a recession.
Hedging in cryptocurrencies follows the same principle as hedging in traditional financial markets; it involves opening a trade using a related asset that is expected to move in the opposite direction of your underlying trade.
Bitcoin and some leading cryptocurrencies are considered better than gold in the field of investment, and as a hedging material during crises, due to the recent fluctuations witnessed by global markets, which have blown up the theory that claims that gold is a safe haven and the best commodity during unsafe times.
The comparison between gold and Bitcoin comes down to several fundamental characteristics that both assets share: they have a limited supply (although the actual limit for gold remains undetermined), investors and analysts often describe it as an anti-dollar or inflation hedge, and for most investors, these assets make up only a modest percentage of overall investments.
Unlike gold, which has remained unchanged for thousands of years, Bitcoin and crypto assets more broadly represent significant technological innovation and advancement on several fronts,
He concludes that "Bitcoin is not gold, but it is better than gold", from an investment perspective and in the long term for many capital owners.
Cryptocurrency Hedging Tips
Hedging is complex and requires a great understanding of the financial markets, and it is definitely not for beginners, and even experienced traders should be careful when using hedging. Below are some tips that will help you when using cryptocurrency hedging strategies.
Understanding the risks
Before implementing any hedging strategy, make sure you fully understand the risks associated with it and any potential downsides, as every financial instrument and strategy has advantages and disadvantages, and it is essential that you fully understand the step you are about to take before taking it.
Asset Distribution
Don’t put all your eggs in one basket. Consider investing in a variety of cryptocurrencies, or even spreading your investments across different asset classes, as this can help protect you from the volatility of a particular asset’s price.
Don't burden yourself with more complexity.
It can be tempting to use complex hedging strategies in an attempt to increase your profits or reduce your losses, but complexity often comes with more risk. If you are not an experienced investor, simple strategies are usually better.
Hedging, when used effectively, is an effective way to offset potential losses in your investment portfolio, but it requires a strong understanding and is not suitable for all investors. You should carefully consider the terms and conditions, margin requirements, fees, and leverage options when using hedging strategies.
Ensure that you are fully aware of the risks involved and potential costs, and you should constantly monitor market conditions and manage your risk exposure while adjusting your trades on an ongoing basis.
You should also use risk management tools such as stop-loss orders to limit potential losses or ensure profits. Finally, consider consulting a financial advisor before engaging in this type of trading activity.
