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eToro Negative Balance Protection -What is it?

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How does negative balance protection work

eToro Negative Balance Protection -What is it?

In this guide, we explain how negative balance protection works. We go into greater detail about the trading feature and what kind of benefits it provides for crypto traders. The article starts with an explanation of what is negative balance protection (NBP). We continue with the risks involved if NBP is not part of the trading package. We end with platforms that offer the service and how crypto traders can take advantage of it.

What is Negative Balance Protection?

The definition of negative balance protection is quite simple. You can trade assets to the amount available in your balance. If necessary, the website’s AI would close your position at the point when your balance reaches zero.

Example:  

1. A trader opened up a $2,000 worth of long (buy) position with 5x leverage for bitcoin at the price of $10,000 per coin. The leverage rate means he borrowed an additional $8,00 worth of assets to match 1 BTC.

2. After some time, market trends pushed the price down by 20% towards $8,000 per coin. The decline swallowed up the trader’s capital, leaving only the leverage amount within the order.

3. As a result of the decline, a negative balance protection function would kick in, liquidating the position. With the position closed, NBP ensured that losses will not happen in case of BTC’s further price decline.

If NBP is nonexistent, the position might close at the point where the trader would have a negative balance. Then, the investor would need to deposit money/coins to cover these losses and even more to have funds for trading.

Pros and Cons of Negative Balance Protection

Pros:

– NBP prevents further losses and negative balance

As mentioned in our example above, the negative protection balance function prevents traders to lose more than what they have. It factors in substantial market changes that can really cripple traders. A negative balance is possible during both bear and bull market movements. Those that short their orders during sudden bull runs lose as much as traders that long during bear runs.

– NBP assist with panic trading period

Additionally, the psychological factor is important as well. Without a foolproof limitation on trades, beginners would be under huge pressure while creating orders. The ability to lose much more than what you have in your balance can be a dangerous situation. The negative protection balance feature allows them to freely test out their strategies with a small amount of funds.

Cons

NBP would close even profitable orders

Whereas crypto trading starters might find benefits in NBP, experienced players might not like the feature. Many pinpoint that NBP can limit their trades by forcing liquidation during high volatility times. 2018’s bear market is proof of that, with many traders losing a lot more than what they have.

The snapshot below shows just how volatile Bitcoin can be at times, surging and rising at alarming speed and level. Thus, it is possible that NBP will close all of your positions even if few are quite profitable.

How does negative balance protection work?

Example: If the trader has a profitable short position with bitcoin but incurs losses with Ethereum and Ripple, all three positions would close. NBP might close out all your positions if your cumulative P&L is negative.

Plus500 Negative Balance Protection

Plus500 negative balance protection has a function called “Margin Call” that automatically closes positions that near the balance depletion. The function runs in the background, meaning that traders do not need to activate negative balance protection themselves. However, it is also important to mention that users cannot switch it off either. Platform stresses the importance of adequate analysis, as traders are responsible for their portfolio management. The function can close single or all positions, depending on the cumulative P&L results.

AvaTrade Negative Balance Protection

AvaTrade negative balance protection offers a bit more flexible than Plus500, as it tries to offer lenient trading programs for its users. Namely, the platform employs AIs that control liquidation orders as to not allow for negative balances to occur. In rare events that such a situation happens, the platform would fund the account with its own funds. It is a pretty nice feature for beginners that have just entered the crypto market.

eToro Negative Balance Protection

eToro negative balance protection employs a similar system to Plus500’s, taking into account all of your open positions. If your overall trading orders reach balance bankruptcy, your positions are liquidated. NBP service does it automatically, thus limiting losses that beginners might incur during their activities.

Conclusion – Negative Balance Protection

Through this short guide, we answered the question of how does negative balance protection works. Plus500, AvaTrade, and eToro all employ the service, limiting losses to funds held in balance. Although carrying several positives, traders are still expected to take care of their own positions. Risks are ever-present in the crypto market due to high price fluctuations.

If you’re interested in more Crypto Trading Educational articles, please read How to Pay Tax on Crypto Trading and Which is the best free crypto trading education for beginners.

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Source: https://www.cryptocointrade.com/crypto-trading-blog/etoro-negative-balance-protection/

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Is Bitcoin changing hands or being exchanged for altcoins?

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HODLers are known to sell at the top of the market cycle. However, since the price rally in July 2020, dormant coins from 2017 and 2018 are selling at the current price level. Pioneer of on-chain analysis, Willy Woo recently tweeted saying,

Is BTC changing hands or being exchanged for altcoins?

Source: Twitter

In several instances in 2014, 2017, and 2018, HODLers have booked unrealized profits. However, Bitcoin’s price was an ATH in that case. Currently, the price is above $11300 and dormant coins getting sold at this price level may indicate the possibility of an upcoming drop in price. 

On the contrary, since the second week of October 2020, several altcoins have been performing well. Offering double-digit returns in a week or a 24 hour period and this is lucrative to HODLers. Based on CoinMarketCap’s on-chain analysis, 88% of HODLers have unrealized profits in their portfolio. In anticipation of a Bitcoin price rally, HODLers may book a couple of tranches of profits and wait. They may buy altcoins like ADA, XLM, or FIL based on their weekly and 24-hour returns and book profits in the short-run.

Is BTC changing hands or being exchanged for altcoins?

Trade Volume of FIL || Source: Coinmarketcap

This is evident from the sudden and unpredicted increase in the trade volume of FIL, in the past 5 days. From 31 million it increased to 155 million in a single day. Corresponding to this increase in trade volume, the price has increased by nearly 22% in one week. 

Altcoins are a lucrative option for another reason, Bitcoin’s volatility and volume are low. The recovery is taking longer than expected, even with the ushering in of smart money. It may be long before HODLers who purchased above $10000 would see an ROI of 100%. In the meanwhile, the ones who have persevered through $3k-$9k level are selling and turning in.

Is BTC changing hands or being exchanged for altcoins?

Map of spent HODLer BTC || Source: Whalemap

Holding an asset long enough comes with an opportunity cost. HODLers who are aware of Bitcoin’s potential long-term return have paid this cost and may be ready to take by selling Bitcoin and trading in Altcoins, or reducing risk exposure and switching to Bitcoin options. This move by HODLers does not signal towards a price drop. There is an equal possibility that this builds a bullish case for Bitcoin in the longterm and altcoins in the short term.

Source: https://eng.ambcrypto.com/is-bitcoin-changing-hands-or-being-exchanged-for-altcoins

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Founder of DeFi’s Yearn.finance (YFI) just launched another Ethereum experiment

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Yearn.finance (YFI) founder Andre Cronje is full of ideas, even after he managed to roll out one of the most successful crypto projects in history.

The DeFi innovator recently unveiled his latest experiment, a network called the Keep3r Network, whose native token is KPR.

Unfortunately, like his other recent experiment, some participants got burned as they bought the token of the project without thinking, then got dumped on by bots and power users that managed to accumulate large swaths of this asset.

Here’s a recap of Cronje’s latest project, including what it is and what went down after he released it.

What is the Keep3r Network?

According to Cronje’s Github, which published for this new system on Oct. 19, Keep3r Network is a decentralized marketplace where projects can post jobs and where users can take jobs.

Jobs can be anything as “simplistic as calling a transaction, or as complex as requiring extensive off-chain logic.” A sample job Cronje mentioned was calling the “harvest” function in a Yearn.finance Vault, which collects and liquidates the coins farmed by the invested capital.

The idea with Keep3r is to allow projects strapped for manpower, such as Yearn.finance perhaps, to offload some of the work or maintenance to a group of freelancers.

To ensure that the user is right for a job, job posters can “specify a minimum bond, minimum jobs completed, and minimum Keeper age required to execute this function.”

In this system, the reward for each job being completed is meant to be paid in KPR tokens.

Job posters can pay out KPR by providing KPR-ETH liquidity on Uniswap.

There is no formal user interface for this network, with Cronje using the term “beta” in the project’s readme document.

A stealth launch

Like with Eminence and Liquidity Basic Income — Cronje’s two prior experiments released in the past month — Cronje directly interacted with the Keep3r Network contracts, signaling to Ethereum users that it is him behind this project.

Unlike with Eminence and Liquidity Basic Income, though, this project flew under the radar.

Cronje did not tweet about it, nor did he publish a Medium blog on the matter.

This meant that the only ones who know of Keep3r Network existence for a long time were those that followed Cronje’s GitHub, or those that tracked his Ethereum address. Twitter, which catalyzed the hype around Eminence and Liquidity Basic Income, did not pick up on this stealth launch.

As a result, little capital flowed into the KPR token itself.

However, there was some money that found its way into KPR.

By the evening of Oct. 19, KPR traded for $2,000 — 200,000 percent than its starting price just shy of $1.

But as quickly as it rallied, the original KPR dumped back under $100.

The reason: Cronje redeployed the Keep3r contracts a number of times, seemingly to iron out bugs in the network.

He continues to test KPR’s functionality with new contracts. But for some reason, bots or users experiencing FOMO continue to buy the coin anyway as they seek to capture the next coin that rallies 1,000,000 percent.

Posted In: , DeFi

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Source: https://cryptoslate.com/founder-of-defis-yearn-finance-yfi-just-launched-another-ethereum-experiment/

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Bitcoin Decoupling Nearing $12K As Wall Street Tumbled: Crypto Market Watch

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Bitcoin finally made a move in the past 24 hours and surged to a new 7-week high of over $11,800. Interestingly, BTC’s price increase contrasted with the US stock markets as the three most prominent indexes closed yesterday’s trading session with serious losses.

Bitcoin Spikes To $11,820

CryptoPotato reported yesterday that Bitcoin had remained relatively calm in the past several days, despite recent negative news. The popular digital asset exchange OKEx suspended withdrawals after reports that its founder was taken away by the police, and the CME gap left open at $11,100 suggested a possible short-term price drop.

However, the primary cryptocurrency tends to prove people wrong, and that precisely what transpired yesterday. BTC traded around $11,400 but initiated an impressive leg up that resulted in a 3.7% increase to $11,820 (on Binance). This was the highest price level Bitcoin had seen since early September.

The asset has retraced slightly since then and currently hovers around $11,750. Nevertheless, this is still a 2.8% increase on a 24-hour scale.

The technical aspects indicate that the $12,000 – $12,100 area is the next major resistance in BTC’s way up.

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BTCUSD. Source: TradingView
BTCUSD. Source: TradingView

With the price jump mentioned above, Bitcoin displayed early signs of decoupling from Wall Street. After weeks of resembling the US stock indexes, BTC surged in value, while the S&P 500, the Dow Jones Industrial Average, and the Nasdaq Composite all dropped by over 1.5% in a single day.

Bitcoin Extends Its Market Dominance

Although some alternative coins mimicked Bitcoin’s gains, most have remained relatively still. Consequently, the metric comparing BTC’s market cap with all altcoins, namely the Bitcoin dominance, has increased by nearly 1% to 59.7% in 24 hours. On a weekly scale, it has expanded by almost 2%.

Ethereum’s 1.4% price spike has taken ETH near $380. Ripple (3.1%) is the most impressive gainer in the top 10, and XRP trades close to $0.25.

Bitcoin Cash (0.8%), Chainlink (0.5%), Cardano (1%), and Litecoin (2%) are also in the green from the top ten. In contrast, Binance Coin (-0.2%) and Polkadot (-1%) have decreased slightly.

Cryptocurrency Market Overview. Source: quantifycrypto
Cryptocurrency Market Overview. Source: quantifycrypto

Dash has surged the most on a 24-hour scale (11.6%) to $74. Nano follows with a 10% pump to $0.9.

On the other hand, Aave (-12%) and ABBC Coin (-10.5%) have lost the most value. AAVE trades below $35, while ABBC hovers around $0.57.

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Disclaimer: Information found on CryptoPotato is those of writers quoted. It does not represent the opinions of CryptoPotato on whether to buy, sell, or hold any investments. You are advised to conduct your own research before making any investment decisions. Use provided information at your own risk. See Disclaimer for more information.

Cryptocurrency charts by TradingView.


Source: https://cryptopotato.com/bitcoin-decoupling-nearing-12k-as-wall-street-tumbled-crypto-market-watch/

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