Post
Topic
Board Speculation
Topic OP
How would you protect your potential profits?
by
uninterestedparty33
on 11/02/2021, 14:33:17 UTC
I want to preface this post by saying that I have not studied economics, and these are just my blissful wishes.

For a while this little scenario has been playing in my head:
Say you have 1 Bitcoin. The price is say $50k. At any point in time you sell, you will get 50k, if the price, however, drops below to say $40k, you have a perceived loss of $10k, yep you still have your 1 BTC, but you can buy less USD than you could before. There will come a day when Bitcoin is not valued in USD, but until then, we will stick to the basics.
When stablecoins were first introduced, I did not read about them nor understand them, and ignorantly thought it was a tool to lock the price of a pair such that if the price did drop by $10k, you'd not be unaffected but if it increases, your portfolio would still rise. Because trading is a zero sum game, this is impossible but I still want to continue.

The same goes if we reverse the situation. If I sell 1 Bitcoin at $50k, yes I will have $50k, but if the price increases of Bitcoin to $60k I still have a perceived loss of $10k. The reason I say perceived is because you cannot lose something you never had, right? But some people like me don't experience situations like this as simply perceived loss, for me it's a real loss.
If I decide to buy back Bitcoin with $50k, while the price is $60k, I can only buy 0.83btc, all of a sudden I have a 0.1666 btc perceived loss.

Wouldn't it have been great if my money would still somehow buy me that 1BTC? It's just a dream because if this was possible, you'd have a way to infinitely multiply your holdings.

With that story out of the way, what methods exist, if they even exist, to reduce this perceived loss? Hedging?