ByBit and its insurance system: how to protect yourself on the cryptos derivatives market?

ByBit does as it pleases – In the jungle of derivative markets, precaution is the order of the day. While many trading platforms let their users navigate on sight by offering disconcerting leverage, ByBit decides to take the opposite path. It introduces a childishly simple tool, improving the trading experience in the derivatives markets.

A necessary adaptation

It is difficult to accurately estimate the share of derivatives markets within the crypto industry. According to a report by TokenInsight, spot trading represented a volume of $6.6 trillion in Q1 2020, while the derivatives market weighed the equivalent of $2 trillion over the same period.

Spot trading involves buying a specific cryptogram and selling it at a later date, hoping to make a profit.

Derivatives markets are different in nature. They allow traders to bet on the rise or fall of an asset, without being directly exposed to it. As a result, investors can make gains in all market conditions.

For example, mining professionals use it on a daily basis to balance their positions. They have often made investments of scale for their equipment needs. The economic health of their business is therefore closely linked to the performance of Bitcoin and other mined cryptomoney.

In order to make profits in all market configurations, they may decide to open a short position (short selling) on a particular cryptomony to offset potential depreciation.

Once reserved for an insider clientele (within traditional finance), the inclusive aspect of decentralisation has allowed trading platforms, such as ByBit, to democratise access to derivatives markets.

In order to reach out to these newcomers, ByBit offers an insurance fund to maximise trader protection in a market where volatility and indecision are commonplace.

ByBit insurance: a multi-function tool

Ubuesque leverage effects are now part of the landscape. Being able to put into play 100 times the amount actually owned can be synonymous with astronomical gains, but also induces the risks of an imminent liquidation.

Whether you’re a thrill-seeker or a nature-lover. ByBit’s „Mutual insurance“ allows you to approach your strategies from an original angle.

This new type of insurance gives you the possibility of covering your losses over a period of 2, 12 or 48 hours. Only valid on the BTC/USD pair, it makes it possible to protect a portion of your position (25%, for example) or simply your entire position.

This new feature allows novice traders to experiment with the derivatives markets with much more serenity and more experienced traders to open up their field of strategic possibilities.

It is also a credible alternative to spot markets. Instead of being exposed to Bitcoin by buying tokens directly, it is now possible to open a long position, coupled with insurance to protect your funds in the event of a downturn. The Spot/Derivative combination is therefore no longer a requirement in order to maximise the balance of your positions.