One of the most fascinating aspects of the cryptocurrency world is its speed: In a few minutes, profits and losses can be made that would take an entire year in traditional markets. But contrary to what many say, it’s not just because of low liquidity or the relatively young market. The problem lies here open nature of the entire blockchain world: Everyone has access to everything, which accelerates innovation. We can compare the industry to a jigsaw puzzle where each piece is added at an ever-increasing rate.
You will definitely come across phrases like “.one year in crypto is equal to ten years in any other market;“It’s true in some ways, the speed of this world has never been seen before.
But be careful: if all this is very positive in terms of fundamentals, the same cannot be said on the investment side. The myth of “take it and forget it” is actually just a myth.: It is naive to think that we can buy something today that will certainly be more valuable in ten years, aside from Bitcoin and a few other assets. While there is almost no doubt about the bright future of the industry as a whole, impossible to predict which projects will win: The only certainty is that 99% of existing projects will disappear in the next ten years. This is part of the growth process of any industry, but everything happens ten times faster in the crypto world.
But then how do you make money in a market that offers so few guarantees and so many uncertainties? There are many strategies, but there is no universal solution: depending on your risk appetite and market conditions, one option may be better than the other. In this article, however, we would like to focus on a very specific strategy: one that is certainly advanced, but which, thanks to DeFi, is increasingly available to traders who do not have little time and not much experience. we are talking about a “delta neutral” strategy.
About An investment approach that aims to reduce or eliminate directional riskIn other words, no matter how fluctuating the market fluctuates, the total value of the portfolio will remain the same. This is made possible by a careful combination of long and short positions, so that if one position loses, there will always be another position that wins just as much. But how is it possible to win if you limit yourself to generating profits and losses that are always the same?
Easy to say: DeFi, Earn commission just by depositing your cryptocurrencies. A delta-neutral strategy allows us to capitalize on these profits without exposing ourselves to the volatility of the underlying asset.
Let’s take a purely didactic example to understand the mechanism. Suppose we own ETH and have a 5% return: to implement a delta-neutral strategy, we need to open an additional short hedge position on Ether to compensate for losses from a possible price drop. Like this, Whichever direction the market goes, we will still be able to earn staking rewards.. However, the real return in this case is 2.5%, not more than 5%, because we had to use double capital – half for staking, half for short-term hedging.
This type of strategy can be implemented in many ways with even higher returns: consider yield farming or decentralized trading platforms with leverage, for example.
But even a delta-neutral strategy is not entirely risk-free.: transaction fees, financing costs and possible implementation errors should always be considered. In addition, DeFi platforms may be vulnerable to cyber attacks or technical failures, putting our funds at risk.
Despite this, it cannot be denied that delta-independent strategies can greatly benefit from future innovation and growth of the entire industry. It will be crucial to be able to solve the security, efficiency and scalability problems of capital.represents the main frontier in the diffusion of such strategies today. On the other hand, the opportunity to win seems to be one of the most attractive on the market, especially when combined with the right financial leverage that can multiply returns while keeping profits in check.
Alberto Cuculachi is an entrepreneur, popularizer and university professor in Marketing and Business Development. He has been following the blockchain world since 2013 and founded his YouTube channel DeFi Talks in 2021. It has reached more than half a million people in more than 100 different countries through its channels in the past year. Today, he is engaged in creating useful educational content and tools to make the world of crypto and DeFi accessible to all.
Alessio Vilmercati is a 22-year-old investor and DeFi enthusiast with a Business and Management degree. In 2022, he obtained his Blockchain Technology & Management certificate at the Blockchain Management School in Rome. Predominantly in the world of DeFi, Alessio devotes himself to reviewing dApps every day, looking for new opportunities every day. As an open supporter of this technology and its future application in the traditional world, DeFi Talks collaborates with the YouTube channel.
Federico Chironi is a 23-year-old trader and DeFi enthusiast with a Business Administration degree; He then chose to continue his education with a Master’s degree in Blockchain Technology and Management at the Blockchain Management School in 2021. He has been studying and investing in the blockchain world, especially in the DeFi sector, since 2020. Decentralized Finance, which will bring it in the coming years, has recently been doing outreach activities on the subject in cooperation with the YouTube channel DeFi Talks.
Luigi Travaglini is a popularizer and technical advisor in the cryptocurrency industry. He intersects with the crypto world between 2014 and 2015, then becomes passionate and never breaks himself off. Combining his academic career with a long technical study in the field of blockchain, he started to provide training and assistance services in 2018.