Purpose

The Crypto Market Crash Playbook is designed to help you navigate the tumultuous waters of a crypto market crash. Whether you’re a seasoned trader or a curious investor, understanding the risks and having a strategic plan in place can make all the difference.

Players

1. Traders and Investors: These are the key players in the crypto market. Traders actively buy and sell assets, while investors hold positions for the long term.
2. Stablecoins: These are essential for DeFi (Decentralized Finance) operations. However, they can also be vulnerable during market turbulence.
3. Risk Management Tools: These include stop-loss orders and put options, which help mitigate losses during price swings.
4. Crypto Community: Staying informed and connected with other crypto enthusiasts can provide valuable insights.

Risk Management Strategies

Traditional Finance (TradFi) Solutions

1. Stop-Loss Orders: Set predefined price levels to automatically sell your assets if they drop below a certain threshold.
2. Put Options: Use derivatives contracts to protect against falling prices. For example, buy a put option on BTC with a strike price below the current market value.

DeFi-Native Risks and Solutions

1. Stablecoin Depeg Risk: Stablecoins can lose their peg during market turmoil. Diversify across stablecoins and monitor their performance.
2. UST Example: The infamous UST (Terra ecosystem’s stablecoin) collapsed, losing 99.4% of its value. Be cautious.
3. USDC Depeg: USDC, a major stablecoin, lost its dollar peg in March 2023. Understand the risks.

Conclusion

Crypto is a new and complex market. As the industry evolves, novel, hidden, and more complex risks emergeProtect the downside, as Donald Trump wisely said, and the upside will take care of itself¹. Stay informed, hedge your positions, and remember that opportunities come with risks.