How To Leverage Index Investing To Go Long Or Short Entire Trends

Beating the odds, crypto has become a driving force in the global economy. Traders and investors of all sizes, from individuals that are just starting out to hedge funds and other large institutions, want a piece of this decade’s best-performing asset class. However, due to the crypto market’s relative youth, an important trading method has been missing – until now.

Why Index Investing?

Indices, sometimes called “index funds”, are used to track the performance of different markets. They consist of a limited number of assets that represent specific sectors but can be used more broadly. For example, in the United States, the S&P 500 is a stock market index of the 500 largest companies that represents the overall strength of the country’s economy. Similarly, in crypto, the Durafi Crypto Index tracks the performance of the top ten largest cryptocurrencies in the market.

When deciding to invest in indices, investors typically seek diversification and consistent returns. Since indices consist of many stocks or cryptocurrencies, they enable investors to lower their exposure to risk. Even if several of the companies or tokens in any given index were to fail, it is likely that investors would only incur a small loss. 

This degree of safety enables indices to offer consistent returns that can compound over time. As such, index investors typically use long-term strategies with little consideration for current market conditions, like automatically investing a portion of each paycheck through an employer program.

How To Make Index Investing Better

Though popular, long-term index investing isn’t for everyone. Because indices are usually diversified, they tend to follow the overall economy – during a bullish market, indices rise, and the opposite happens during a bearish market. In some cases, investors who put their money into indices can see the value of their portfolio decrease for extended periods of time during market downturns.  

Other investors, however, choose to play market trends: going “long” when the market is increasing and “short” when the market is decreasing. This style of investing can enable traders to make a positive return regardless of market performance. In contrast to traditional investing, long and short strategies do not require traders to purchase tokens. Instead, traders purchase different types of financial instruments, often derivatives like futures. Derivatives are often offered with leverage, which enables higher theoretical returns at the cost of greater volatility.

How To Short And Long Crypto Trends

Because the cryptocurrency market is still young, only a few exchanges support short and long trading, which are usually limited to individual cryptocurrencies and not indices. This exposes traders to more systematic risk, as most traders find following the broader market behavior easier than predicting the movement of individual cryptocurrencies.

Durafi, an emerging leader in cryptocurrency derivatives, is leveraging the power of DeFi to make shorting and longing cryptocurrency indices possible. Durafi combines the benefits of decentralized liquidity pools with high-speed order books and proprietary innovations, such as the Durafi Derivatives Generator and Liquidity Engine.

The project’s unique offering, the Durafi Fund Token, allows traders to invest in major cryptocurrency trends without having to buy and sell dozens of tokens manually. Also, because Durafi is decentralized, traders maintain the choice of custody over their assets, a benefit missing from typical centralized exchanges.

As a platform, Durafi is making cryptocurrency trading competitive by offering the benefits of DeFi while solving the disadvantages of slower transaction speed, inconsistent liquidity levels, and a lack of derivatives variety. In addition, the project focuses on democratizing access and reducing the cost of active trading strategies for advanced crypto derivatives by reducing transaction fees and simplifying crypto diversification. Traders can interface with Durafi’s protocol either manually or through their API, which comes with the value-add of high-frequency trading and advanced strategy support.

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.