Crypto Loan: 5 Tips For Investors
Crypto Loan is a program where users can collateralize their crypto assets to borrow more crypto in return. Today Tokenize Xchange – Crypto Exchange Platform Singapore will explain the reasons why you should try Crypto Loan as well as 5 tips for successful trades. Let’s find out!
What is Crypto Loan
Crypto Loan is a program from Tokenize Xchange in which customers can use their crypto assets as collateral to borrow more crypto.
>>> Read more: Understand Crypto Loan
Benefits of Crypto Loan
Since the Crypto Loan Program was developed for the purpose of lending crypto assets to traders, Crypto Loan enhances your buying power, allowing you to utilize the value of assets you currently possess to increase the size of your transaction. You can increase your earnings if the value of your investments grows.
Besides, If you are having too many “eggs in one basket” which means your portfolio contains a large proportion of one crypto asset, Crypto Loan can help you diversify your portfolio by collateralizing those assets for a loan. By doing so, you can use the loan funds to vary your investment without selling your underlying assets. Especially when you have a significant unrealized investment income and want to maintain it, this strategy can be advantageous.
However, the Crypto Loan has its risks as well, which must be considered.
Risks of trading with Crypto Loan
Margin Call risks
The margin call is a notification when your account is nearing the liquidation threshold, sent to you by email to decide: partially cut your loss or deposit more crypto assets into your account to maintain.
Liquidation happens when either the LTV reaches liquidate limit, or your borrowed value reaches the Maximum loan amount. liquidation will take place with an additional 5% penalty fee imposed with part of your collateral sold off to fulfill this liquidation. To prevent liquidation, users must adjust down LTV by topping up collaterals or repaying borrows to prevent liquidation.
Some tips for trading with Crypto Loan
Risk management is a prerequisite and most important to an investor’s success. Crypto veterans often say the same thing: If you invest in cryptocurrency without risk management, you are no different from gambling! Therefore, to be successful, you must establish a specific investment strategy, in which it is necessary to minimize the possible risks.
Never “all in”
Trading is for making profits, but the most important thing is not profit, but the ability to preserve funds. New investors often have the mentality of chasing profit as quickly and as much as possible. But no one can guarantee 100% success in trading, even the most experienced investors.
Track market trends
Like everything that exists on this earth, the cryptocurrency market has its own cycles and trends. This is the driving force that leads the price to develop in a certain direction, one way or another.
The market can have many different trends such as rising, falling, or stabilizing. As an investor, you need to find out what trend the market is in order to strategize effectively. But keep in mind that trends can change quickly. Therefore, you must have suitable short-term and long-term strategies.
Do you know the difference between support and resistance levels? Do you understand candlestick charts? How to use the function of the RSI (Relative Strength Index) and MACD (Moving Average Convergence Divergence) forecast indicators? Those are just a few of the many tools that help investors analyze the market. Cultivating, and learning to develop good analytical skills will help you build a tight and specific trading plan, well grasp the trend of the market.
Track your orders closely
You must have read some news about some Bitcoin investors who bought Bitcoin in the early days and then accidentally “forgot” them for decades. And when Bitcoin price skyrocketed, they earned huge sums of money. Just forget it! You need to accept the truth that not all crypto investors are that lucky.
Cryptocurrencies are financial assets with relatively large short-term price fluctuations. If you “forget” your order for a while when the market experiences unanticipated stressful events, in the worst case, your loan might be liquidated instantly. To avoid unfavorable scenarios, always set a stop loss/take profit and keep a close eye on the market.
Cryptocurrencies are subjected to high market risk and volatility despite high growth potential. Users are strongly advised to do their research and invest at their own risk.