The correlation between Bitcoin and the rest of the market is very high. This means that if Bitcoin drops, altcoins tend to fall with it. We should spend some time searching for assets that are not highly correlated to Bitcoin.
So if we buy ETH, SOL, XRP, LUNA or some others, we will struggle with the same problem. We need non-directional opportunities. We must avoid what Peter Lynch calls “diworsification”, diversify to ruin our portfolio.
Non-directional opportunities are defined as investments or strategies that allow you to make money without waiting for the market to go up or down. We can think about:
- Staking and mining.
- Liquidity providing.
- Lending and borrowing
Staking and mining are the most traditional and conservative. Once you validate a transaction you get paid. And you get paid without depending on the value of the coin itself, you can sell it immediately. The payment is non-directional. But the amount received may be subject to hedging, we will discuss it later.
Liquidity providing, onchain or off-chain is really important to create efficient markets. And the goal is to avoid being dependent on the main assets. Using a base currency that allows you to avoid unaffordable losses.
Lending is the traditional business model of borrowing money from savers and lending to businesses and debtors. In crypto we have leverage and Defi Protocols that allow us to have deeper exposure to the market.
Now the market is rather calm. We may expect higher volatility. So avoiding unaffordable losses in exchange for reducing the potential return seems wise.
We will keep on updating this information as it’s a general perspective around the possibilities that the crypto world offers.