You probably know this as a fact: Crypto-assets can experience staggering price rises and vertical free falls in the space of an hour. This volatility often spells trouble for traders caught on the wrong side of the price swings.
As we enter mid-September, the market continues to see a lot of volatility. To protect you from adverse and sudden market fluctuations, Bybit is pleased to announce that the latest version of Mutual Insurance is now live! Mutual Insurance, a user-friendly and effective risk management tool for BTCUSD perpetual contract positions, can help you offset losses and secure profits.
You can enter a long position with long protection to hedge against any downside risk, and purchase short protection for short positions to insure against potential upside risk. Mutual Insurance can cover your loss from up to the expected liquidation price.
Let’s take trader A and trader B as an example to understand Mutual Insurance better.
Assume they each open a 5,000 BTCUSD long position at $5,000. When the mark price rises to $6,000, trader A and trader B’s unrealized profit is 0.1667 BTC.
5,000 x (1/5,000-1/6,000) = 0.1667BTC or $1,000
Trader A is pleased with the return and closes their position at $6,000, maintaining a profit of $1,000.
Trader B decides to secure their profits with Mutual Insurance instead. Trader B proceeds to purchase 5,000 long protection at a $6,000. If the index price falls to $4,000 and the trader close the Mutual Insurance, the Mutual Insurance will compensate trader B for the loss. In other words, trader B can still earn 0.5 BTC or $2,000 as the insurance payoff.
What if the price now soars to $7,400? The long position of trader B is still in effect. They can now exit with a profit of 0.324 BTC or $2,400. Considering the insurance payoff trader B has claimed earlier, their total profit is significantly higher than that of trader A.
Now that you have seen how Mutual Insurance works in this scenario, let’s look at its enhanced and intuitive user interface.
You can leverage this simple graph to visualize the payoff condition of your position. With a few clicks, you can set or modify your protection duration and insurance amount with ease.
Do not forget to read the prompt for guidance if you want to settle your insurance early.
As you debate whether the crypto market is copacetic or not yet out of the woods, Mutual Insurance is here to protect you against elevated losses while safeguarding your profits by locking in profitable positions. Activate Mutual Insurance today to enjoy your crypto roller coaster ride without fear!