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SwapDEX – An alternate value proposition to a purely Bitcoin-centric portfolio

derailedcapitalism's Photo
by derailedcapitalism
Friday, Dec 04, 2020 - 9:27

With government-issued bonds yielding next to nothing these days, and violent volatility the hallmark of most equity portfolios, nervous investors are looking for profits elsewhere. One very promising candidate is cryptocurrencies and digital assets such as SDX tokens that control stablecoins. With all the bad press recently around cryptos like Bitcoin, the big question for investors is: Is there a value proposition for adding them to a diversified portfolio?

The Bitcoin Rollercoaster Revisited

Anyone who has invested in Bitcoins since the early 2015s, and held them consistently since then (only the diehards!) will know the gut-wrenching rollercoaster ride they’ve experienced.

Let’s just recap some of the milestones the digital currency has experienced:

Date

Open

High

Low

Close

12/2/2015

361.8450

362.2320

349.4650

359.1870

1/1/2016

430.7210

436.2460

427.5150

434.3340

1/1/2017

963.6580

1,003.0800

958.6990

998.3250

1/1/2018

14,112.2002

14,112.2002

13,154.7002

13,657.2002

1/1/2019

3,746.7134

3,850.9138

3,707.2312

3,843.5200

12/2/2020

18,993.9023

19,282.2207

18,356.3223

18,922.1621

SOURCE: Yahoo Finance

 

Only the most committed of Bitcoin enthusiasts would have stuck with their Bitcoin positions over that period. Most of us would have lost our nerves and cashed out part way during the rough ride. We saw the currency move from 359.187 on December 2, 2015, to 804.834 on Jan 12, 2017, to 3,399.472 on Feb 7, 2018 to 4,970.788 on March 12, 2020. Between those values, it traded anywhere as low as 361.845 and as high as 19,282.2207.

That’s not how investors want their money to behave. Traders, perhaps, would have loved this volatility. But the vast majority of those looking to build investment portfolios aren’t savvy traders. Those are the ones who wouldn’t touch Bitcoin with the proverbial 10-foot pole!

Negative Drivers

The very feature that endears cryptocurrencies in general, and Bitcoin (the 500-pound gorilla of the crypto world!) in particular - their anonymity, sometimes acts as a negative driver to attracting more investors to its fold. So worried are monetary framework watchdogs of digital currencies, that the U.S. Federal Trade Commission (FTC) has raised formal red flags about them to the public. The FTC goes to great lengths to warn prospective crypto coin investors that:

  • Cryptocurrencies aren’t backed by a government or central bank
  • If you store your cryptocurrency online, you don’t have the same protections as a bank account
  • A cryptocurrency’s value can change constantly and dramatically
  • Nothing about cryptocurrencies makes them a foolproof investment
  • Not all cryptocurrencies or the companies behind them are the same

Nefarious actors have also cast Bitcoin in negative light by adapting old scams into the digital currency framework. They’ve been using these adapted methods to defraud many investors – especially those in their golden ages – out of their life savings. The FTC has warned prospective Bitcoin users against schemes, such as Blackmails, Online Chain Referral Schemes and Bogus Investment and Business Opportunities, which have been around for decades – except now fraudsters have put a Bitcoin twist to them.

It is these negative drivers, amongst a host of others, that have put impetus behind central banks to develop their own digital currencies.  And traditional payment processing networks, such as Mastercard, are cheering them on by offering tools and technologies to get in on the crypto action.

Given that backdrop, it would appear that the days of the “real” cryptocurrencies and digital exchanges are numbered. So, how would one build diversified portfolios around them?

The Way to Diversify Your Bitcoin Portfolio

The realization from central banks, to wade into the digital currency world, is a passive acknowledgement that cryptocurrencies are here to stay. The days of banning them or pushing them into regulatory submission have passed – so now most central banks have realized that “If you can’t beat them – join them!”.

But how do you embrace Bitcoin, or other digital currencies, without getting burned? The answer: Opting for a wallet-to-wallet trading experience, that gives currency and token owners the advantage of low-cost transactions, while also enabling direct-to-user interaction, without the need to deposit bitcoins onto an exchange.

The age-old mantra, however, still holds true: Buyer beware! The answer therefore lies in selecting a digital currency platform that offers safety, security and diversification, without compromising the positives from owning Bitcoin (or other digital assets) in a diversified portfolio.

Like any trading and investment ecosystem, time is of essence in the Bitcoin world too. However, most cryptocurrency platforms aren’t good at managing time. They typically mandate registration of the account, which includes identity confirmation and a slew of personal information verification. By the time your identity is verified, and your account fully operational, the opportunity you had lined up might be no longer! To diversify your Bitcoin portfolio, you need a way to be nimble in executing your game plan.

  • Account holders must benefit from a wallet-to-wallet trading experience which makes it easier (compared to traditional Bitcoin exchanges) to use simple swap options and trade assets
  • For diversification, Bitcoin holders must be able to play multiple roles - choose to become a taker, a maker, a provider of liquidity, or just choose to swap assets
  • Diversification also requires Bitcoin owners to be able to use their trading platform of choice to use counter parties to trade Bitcoin in the ETH ecosystem

Conventional crypto exchanges lack many of these characteristics!

The Way Out

One way to diversify your Bitcoin portfolio is to do more than just buy and store Bitcoins in an account, waiting for an ideal opportunity to sell and take profits. SwapDEX offers a great way to break away from the traditional view of Bitcoin profitability. As one of the newest decentralized exchanges, the registration-free platform focuses on enabling the trading of ERC20 tokens between users, but without the added overhead of intermediaries.

In future, anyone who buys SDX tokens on the platform will become shareholders of the platform. This will offer income investors the opportunity to tap into a steady new income stream. A financing and loan/lending feature offers additional diversification to the exchange. Speed, security, cost effectiveness, agility and income generation – Those are pillars on which to build a truly diversified Bitcoin portfolio – and SwapDEX offers it under one roof.

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