Amid the decline in the prices of cryptocurrencies on the back of rising inflation rates and geopolitical unrest, analysts have outlined some of the ways investors can make returns on their investment.
In the last few days, a stablecoin, called TerraUSD (UST), and its sister currency Luna dropped by about 80 percent, which consequently had an effect on the broader crypto market, including Bitcoin and Ethereum.
Bitcoin, the world’s most prominent cryptocurrency, has suffered some heavy losses in recent days, falling to less than $30,000 on Tuesday, TradingView data show. This represents a 50 percent decline from its all-time high of about $69,000 in November 2021.
According to experts, Terra Luna is now almost worthless as it is creating fear among investors, even aggressively bullish crypto investors are now panicking.
Lucky Uwakwe, a blockchain expert, said taking advantage of annual percentage yields (APYs) is one way to make profit amidst the dip in crypto prices. APYs act as a cryptocurrency savings account similar to an annual percentage rate (APR) account.
“Decentralised finance (DeFi) protocols offer a great deal of interest to your token instead of just keeping them idle during the bear period. By putting it in one of the DeFi protocols, you will be making a certain percentage off that. This means that even though the dollar equivalence of your token is going down, you are still gaining interest,” he said.
According to Uwakwe, easy accumulation is another way to make money, despite the downtime in the market.
“If you’re having 100 units of a particular token, during a bear period, you can still accumulate more tokens. However, the dollars’ worth might reduce. I sold some units of a particular token a few days ago and bought many more units of the same token with the same dollar equivalent, adding 50 units,” he said.
Speaking on lending and borrowing, Uwakwe said while it is not all protocols that allow lending, privileges can be given to an individual who decides to learn in that protocol.
“If you belong to Aave protocol, and are a part of people who borrow collateral from there and all of a sudden Aave dips. In this case, the platform will call for you to top up and failure to do this means they will sell. In the case of selling, they are not selling to the open market but to their existing users who are lenders. Thus, they make money from such protocols,” he said.
For bitcoin traders who buy coins and keep it at the exchange, Rufas Kamau, a research and markets analyst, said in a tweet that such people are net short, contributing to the price of Bitcoin going down, even if their goal is higher prices.
“If they keep their newly acquired bitcoin on the exchange, they are not reducing the supply; In fact, they are giving the exchange more liquidity to create more fractions. This pushes the price of bitcoin down.”
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To make more money, Kamau suggests that investors stake their bitcoins at the exchange for one year without touching it. “If you buy bitcoin and keep it at the exchange, to discourage you from withdrawing your bitcoin, the exchange gives you a discount on transaction costs based on your exchange balance; the more you keep in the exchange, the bigger the carrot.”
The analysts say since the crypto market is an unpredictable one, another way to make money is to short the crypto market. This means betting that the market will go bear and in a case where an investor’s prediction occurs, they will make profit.
According to Uwakwe, this comes with a high risk as it is not always guaranteed. Taking a cue from Michael Patryn, the most recent investor who made $760,000 gain from shorting the market, Uwakwe said investors have the ability to make profit from shorting the crypto market.
Patryn is the co-founder of Quadriga, a Canada-based defunct exchange. According to transactional analysis by PeckShield, the Ethereum associated with the name Sifu.eth, owned by Patryn, made several UST trades a few days ago netting him $760,000.
While some were cautious that the token could fall lower, Patryn risked that it would return towards equality with the dollar. He swapped $2.8 million of tether (USDT) for 3.88 million UST when it was near its lowest point.
After that point, reports state that the value of UST rose toward the dollar mark as high as $0.94. At this point, Patryn sold the UST back for $3.56 million of USDT, resulting in a $760,000 profit.
Speaking on staking and dollar-cost averaging, Orphi Rume, a blockchain expert, said during the bear period, investors can buy more at a significant low and when a rebound occurs, the money grows back and yields profit.
“For staking, say one year or three months, depending on the project at hand, and this is more like a fixed deposit. You will not sell the token and at the end of the period, you will be given a certain percentage, depending on the particular token you traded in,” he said.