A basket can be explained to be a financial tool or instrument that allows companies or investments to come together as one and as a result of this, they would be able to hedge the risk on multiple assets at the same time. By this form of collaboration, they have been able to reduce any substantial losses which a company or business could have suffered separately. Hedging simply means a risk reduction strategy which provides insurance and reduces the potential for loss.
Relating this to cryptocurrency means it allows people or investors to buy or sell different types of cryptocurrencies more easily than having to trade separately or individually. This is simply a way of diversifying one's investment without having to purchase an individual cryptocurrency one at a time. With the Hedging Baskets strategy, an investor can be assured of a minimal loss.
Hedging basket approach affords investors who seem not to have time, enough knowledge and patience the opportunity to invest in cryptocurrencies of their choice without the need to manage them independently. Also, to those that run multiple cryptocurrency investments, adopting Hedging Baskets strategy will lead to the elimination of unnecessary overload of work that comes with it.
According to SET( Secure Electronic Transaction) PROTOCOL which simply means a system that ensures security of electronic transactions, Hedging Basket approach on cryptocurrencies won't only make it easier to trade on multiple cryptos but also there would be a reduction on high transaction fees that always accompany the collection of trades involving many different types of cryptocurrencies.
Why Hedging Basket is Important for Your Cryptocurrency Trading
-Cryptocurrency is generally known for its high volatility and the volatility here is talking about the fluctuation in price. Therefore, an investor who desires to make a profit on every investment he makes on cryptocurrencies must not jettison the idea of adopting the Hedging Basket strategy so as to have a minimal loss in case of any uncertainties.