How to leverage your Bitcoin investment with minimal risk

in #bitcoin8 years ago

So Bitcoin is over $16,000 right now and I wanted to share an interesting strategy for you folks to consider. On BitMex, you can invest in a Perpetual Swap. What this means is that you are basically betting on the gains (long) or losses (short) of BTC. You can leverage your position up to 100X (which is basically suicide). This strategy isn't about doing crazy leverage, it's about slowly increasing your gains in BTC. Here's how it works -

On Bitmex, you either pay or collect a small percentage of your investment every 8 hours. The amount is based the Time-Weighted Average Price (TWAP) over the course of the preceding 8 hours. BitMex doesn't collect this funding, they pay it out from one group to the other (usually the longs pay the shorts because the price is usually rising, but the percentage can, and often is, negative where the shorts pay the longs). The amount varies every 8 hour period and it's capped at +/- 0.375%. Historically, this funding amount has averaged 0.0161% (over the last 1000 funding events). So, if you buy the swaps at a price of 16000 with low leverage, such as 2x, your liquidation point might be below 9000. Now, so long as btc never drops to this price, you can ride up the rise in btc indefinitely. You can also use isolated margin, and not invest your entire account amount. And note! As long as you don't get liquidated, this amount added to margin is still invested in Bitcoin. So this amount of btc is still providing you with 1x gains while the rest of your position is giving you more. So you could conceivably buy your liquidation point all the way down to $5,000 if you wanted. You're still profiting more than you would simply being invested in BTC.

So how much would you be paying in the funding fees in order to execute this strategy? On average, it will be .0161% times your leverage (lets say 2x) which comes to .0322% every 8 hours. Times 3x a day, 365 days a year? You're paying 17.625% per year. But that's not 17.625% of your gains, it's only 17.625% of your CURRENT leveraged investment (the amount added to margin to reduce liquidation point is not adding to your cost). So if you invest $100 in this strategy, you will have $200 in swaps (at 2x leverage). If BTC hits 100K at the end of 2018, you still only have $200 in swaps, so at the end of the year, you will have paid $17.63 in exchange for holding for the whole year. And your gains would be 14x with the 2x leverage versus only 7x if you simply held BTC. Maybe it's worth the risk.

If you're curious, you can get started here. Note, this is my affiliate link. It will save you 10% on fees for the first 6 months of trading.

https://www.bitmex.com/register/0oXeWg

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nice article keep it up, please follow me and upvote for me and i will return the favor.

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