There is little doubt the cryptocurrency markets are full of carnage. The price action is difficult with downward trajectories all over the place. For the moment, this is the norm.
How does one project him or herself at these times? Obviously, being on the sidelines with a portion of one's portfolio is helpful. Timing markets is a difficult thing to do. However, it is possible to mitigate the risk associated with market pullbacks.
In this article we will discuss how the Hive Backed Dollar is providing offering a simple, but effective, use case.
Parking Spot
The biggest question is how do you get away from the volatility in the digital asset world without leaving it. Sure, we can sell our Bitcoin and run into fiat. That is one way to do it. However, that is removing ourselves, even if just temporarily, from this space.
Enter stablecoins.
These are designed to reduce the volatility while also providing a "parking spot' for our money. Since they are usually tied to some peg, if they work properly, value will be retained during market drops.
Let us look at how HBD fared over the last 90 days. All charts from Coingecko
We can clearly see the sideways looking pattern. Certainly, there is a range the price moves in. However, we can see the bounce back from the downside is rather rapid.
There is a new entrant to the equation, pHBD. Let us see how that chart looks since the launch about two weeks ago.
Again, we see some spikes but there is a great deal of sideways movement. Another thing that we should note is the price difference between HBD and pHBD. This presents a strong arbitrage opportunity.
The idea of a parking spot enters when things turn south. To illustrate we will show a couple more charts.
The granddaddy of them all, Bitcoin hasn't fared very well over the last 45 days or so. It dropped from $47K to $35K. There is a rough pullback.
Moving closer to home, we can see similar movement in HIVE.
The last month and a half hasn't been kind here either. From $1.25 to about 70 cents. That is a hard hit.
50/50 Rewards
On Hive, there is the option of selecting posting rewards to be paid out in either 100% Hive Power or 50/50 where the rewards as split as Hive Power and HBD.
The latter is obviously a very attractive alternative in times like these.
Of course, to truly take advantage of it, one must implement it long before the crash happens. Since few of us can time it, going with this option is a way to mitigate the risk. When one gets half the rewards in HBD, and places them in savings, the exposure to market activity is reduced. Of course, the fact the HBD Savings is paying 20% APR helps a great deal also.
Because of this, HBD is an oasis in a sea of red in the markets.
It also emphasizes one of the main use cases for this coin. Risk management is something we all have to embrace. Cryptocurrency markets are very volatile. Certainly, there is the potential to make a lot of money. However, as we are witnessing, pullback of 30%-50% are not uncommon.
HBD helps us to protect against this. By opting for a portion of our holdings in this coin, we can enjoy a strong return while knowing that we can swap out of HBD for near $1. Even with the price dropping on the external exchanges, pHBD along with Hive's Internal Exchange are at 1.01 and .97 respectively.
The price of HBD on the external exchanges just jumped from $.93 to $.98 in the course of typing this article.
This also shows the choices we suddenly have for swapping our HBD. While there are not a lot of places to trade it, having these two easily accessible options is of great help. People can opt where they want to sell their HBD.
Since the introduction of an aggressive interest rate, the appeal of HBD is that it is a solid foundation upon which to build one's portfolio. Accumulating these coins while earning 20% APR with very little risk is a terrific approach. As we can see, when the markets decide to sell off, HBD offers protection.
For those who are stacking, at least some of one's holdings are preserved.
It is just one of the many use cases for HBD. As they are built out, the appeal of holding the coin is only going to increase. This will offer even greater demand which will help to keep the peg.
Times like these in the markets remind all of us how we always have to consider risk. HBD is a solid option for a portion of our holdings.
What are your thoughts? Let us know in the comments below.
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