Insights on Crypto Bull & Crypto Bear
by the Crypto Zoo DApp Team
This article is for informational purposes only. You should not construe any information contained in this article or other material as legal, tax, investment, financial, or other advice. Nothing contained in this article constitutes a solicitation, recommendation, endorsement, or any third party service provider to buy or sell any securities or other financial instruments in any jurisdiction in which such solicitation or offer would be unlawful under the securities laws of such jurisdiction.
All content is information of a general nature and does not address the circumstances of any particular individual or entity. Nothing in the article constitutes professional and/or financial advice, nor does any information on the article constitute a comprehensive or complete statement of the matters discussed or the law relating thereto.
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The combination of Crypto + Altcoins definitely sounds ’volatile’ for most people due to low liquidity, lack of established reputation, lack of community and lack of market regulations. As a result, people are less inclined to venture into the Crypto and Altcoin space which has resulted in less awareness and less liquidity as well as an absence, thus far, of derivative markets for Altcoins.
On the other hand, some Altcoins seem to be considered the “hidden gems” in the eyes of traders with a higher risk appetite and of venture capitalists. They follow the basic financial principle of “high risk high return” and have accumulated some Altcoins which they believe have the potential to increase significantly in value. However, in order to mitigate the risk and ensure a higher probability of success, this requires very deep pockets which seriously limits the number of people who have the capability to participate.
Is there any derivative or instrument available for the retail and individual user to have an open position in Altcoins while limiting the downside risk?
Introducing Crypto Zoo on the Pundi X Platform
The essence of finance is exchanging the value of a variety of assets across specific time and space. Bull and Bear in the Crypto Zoo DApp are conceptually similar to options products: they are designed to hedge future fluctuations in today’s value. In short, it functions like an insurance product that provides a price floor to protect the initial principal while opening a position to take advantage of the expected direction of the market.
Suitable Market Conditions
Crypto Zoo is a tool to hedge future expectations by leveraging ‘time value’ in a highly volatile market while providing a price floor. In a stagnant market, participants might lose transaction fees as the settlement price falls within the price gap*; in contrast, participants might be able to gain a return in a highly volatile market with the protection of the initial value of their stake.
* NOTE: The price gap is the difference between the strike price and the base price. So, for example, the market price of ALT (base price) now is 1ALT= 1USD, and Crytpo Bull is selling 1ALT at that base price. If, at the end of the period, the settlement price for 1ALT is 1.05USD — that is, below the strike price of 1.1USD — the user will take back his principal but lose the original transaction fee.
If the settlement price is 1ALT =1.2 USD (i.e., above the 1.1USD strike price ), the user will get back 1ALT and sell it on the open market and make a profit. In that situation also, the user does not get back the initial transaction fee.
It is also worth noting that Crypto Zoo provides minimal negative impact to the principal amount by locking the price floor, referred to as ‘low risk, medium return’. Hence, it is suitable for participants who are afraid to miss the ‘FOMO’ (downside or upside) of Altcoins, and at the same time, significantly mitigating potential losses.
Crypto BULL — for those who want to buy Altcoins in the highly volatile market, but are concerned about buying it high and losing their principal.
Crypto BEAR — for those who want to sell Altcoins in the highly volatile market, but are concerned about selling low.
Price gap of Crypto Bull & Crypto Bear
There is a price gap (i.e., spread) between the strike (selling) price and the current market price in Crypto Bull & Crypto Bear. The spread can be seen as the premium of ‘future time value’ from a financial perspective. In layman’s terms, you can see this price gap as an insurance premium, or alternatively, a higher upfront transaction fee.
Apart from that, this might affect the trading volume in the spot exchanges if the quoting price is the same.
Return depends on whether the settlement price rises above or drops below the preset strike price.
Example 1: Assume the strike price in Crypto Bull is 1ALT = 0.001 BTC. At the end of the period, if 1ALT = 0.0011 BTC (i.e., a 10% return, (0.0011 -0.001)/0.001), you will get back your 1ALT and sell it in the open market; or at the end of the period if 1ALT = 0.0009 BTC, you can ‘undo’ the transaction and take back your principal, 0.001 BTC.
Example 2:Assume the strike price in Crypto Bear is 1ALT = 0.001 BTC. At the end of the period, if 1ALT = 0.0011 BTC, you can ‘undo’ the transaction and get back your ALT (market price > strike price) and choose to sell in the open market; or if 1ALT = 0.0009 BTC (i.e., a 10% return, (0.001–0.0009)/0.001), you have already sold your ALT at the price of 1ALT = 0.001 BTC.
The possible returns in using Crypto Bull & Bear is highly dependent on the volatility of the market.
If you foresee that the market will fluctuate towards a certain direction in the future and assuming you can afford the transaction fee, the Crypto Bull & Bear plans might be suitable for you. And if you foresee that there will be volatility, but are unsure about the direction the market will go, you can buy both the Bull and Bear plans. On the other hand, if you foresee the market will remain stagnant in the future, then this might not be suitable and it might be better to just buy or sell on the spot market.
Get rebate and the transaction fee discount
You can also earn up to 20% of transaction fee discount and 25% of fee rebate when you successfully refer your friends to login Crypto Zoo DApp with your referral code.
What is the rebate?
When your invitees purchase plans, you will get % of the fee depending on the level you are in.
The more NPXS you lock in the DApp, the higher level you will be in and higher percentage of rebate you will get. Here is the chart:
For example, if you lock 3,000,000 NPXS, you will get 10% rebate from the Crypto Zoo transaction fee your friends have and 10% fee discount when you purchase plans.
Also, you friends will get 10% transaction fee off by activating Crypto Zoo DApp with your referral code within 30 days.
Try it now by downloading XWallet and adding Crypto Zoo DApp. Please feel free to let us know your feedback!