The Naira is a currency used in much of Nigeria whose value has been fluctuating greatly in recent years. This year, the Nigerian government has decided to peg the Naira against a valued, fiat currency – the United States Dollar (USD). What does this mean for speculators and day-traders interested in taking a short-term position on the Naira or any other African cryptocurrency? We answer this question and provide some helpful tips for those seeking to make a quick buck in the space.
The Basics Of Short-Selling
To begin, let’s examine the basics of short-selling. Many people are familiar with the concept of short-selling, as it is often referred to in the mainstream financial press, but not all are well-versed in the art of entering a short position. The general public often views short-selling with a mix of suspicion and skepticism, since it seems to defy the fundamental tenet of investing – to make money from a long-term holding of an asset.
The easiest and most efficient way to learn how to short-sell is through education. Luckily for the crypto beginner, there are numerous platforms that provide education and training in the space. The most significant of these platforms are Robinhood and CryptoTrader+, both of which are US-regulated brokers which offer, among other things, short-selling.
The Pros And Cons Of Short-Selling
There are several noteworthy advantages to entering a short position on an asset, especially one that is volatile and relatively uncorrelated to other markets, such as the BTC/USD pair. First, short-sellers gain a unique insight into the underlying value of the underlying asset. Through examining daily and weekly charts, as well as keeping an eye on the supply and demand trends, the short-seller is able to determine, with a fair degree of accuracy, whether or not the price of a particular cryptoasset is likely to rise or fall. In order to profit from short-selling, the short-seller must first determine the ‘direction’ of the price trend – if the trend is up, he makes money by selling short, and vice versa.
One of the significant advantages of short-selling is that it provides the investor with an opportunity to profit from short-term price movements. Since the price of a cryptocurrency can change frequently and dramatically, the opportunity to make quick money, even if one’s opinion about the true value of an asset is inaccurate, is nonetheless present. Short-selling allows the savvy investor to capitalize on these short-term price movements and profit from a short-term trend, rather than attempting to time a long-term trend.
Where To Buy And Sell Naira
Let’s now examine the various places that one can purchase and sell Naira. The most popular markets for the cryptocurrency are the well-known exchanges which trade in the currency; however, these platforms are fairly unresponsive to individual requests for Naira-based accounts, and one must rely on getting in touch with customer service via phone or email.
There are also a number of smaller, boutique crypto exchanges that operate with a much lower volume than the big-name platforms, and are therefore, both, less reliable and less stable. These exchanges are generally much more efficient and offer a much quicker response time if one needs to open an account. Unfortunately, due to the nature of crypto-based markets, these small platforms often require high minimum deposit amounts in order to operate, and the small number of available seats makes it virtually impossible for new users to gain access to the accounts. In addition to creating a barrier to entry for new users, these restrictions serve to artificially prevent price volatility and create an illusion of safety, since no matter how many people are ‘in’ the market, the available supply of a particular cryptocurrency will never meet the demand.
The Safe Haven Of Stablecoins
While most people are focused on the ups and downs of today’s price movements in the financial markets, a steady and reliable form of value, often described as a ‘stablecoin’, is rising in prominence. Launched in 2016, USD Coin (USDC) has quickly become one of the most popular and well-known stablecoins. What is particularly attractive about this particular coin is that it is backed by a reserve of USD held by the Federal Reserve, and therefore, offers the same level of safety and predictability as the US dollar itself.
Forbes has described this form of value as ‘The new gold standard for [crypto].’ To learn more, visit the USDC website.
Make Money Day-Trading Or Short-Selling
If one is looking for an easy way to make money, without needing to become an expert in any field and without risking large sums of cash, one can easily enter the world of day-trading or short-selling. Day-trading involves purchasing and immediately selling stocks, funds, or other securities at predetermined prices, usually on large-cap, popular stocks, looking for short-term price movements, or taking advantage of inefficiencies in the market. Day-trading is extremely easy to get started with, and even the simplest of CFDs for day-traders can be accessed through virtually any reputable brokerage, like MetaTrader 4 or 5, which is also suitable for those seeking to learn how to short-sell.
The Naira Is Headed For The Red
The last few months have seen the Nigerian Naira rise in value, largely due to the unstable political and security situation in the country. The United States decided to sanction a number of Nigerian officials and citizens, stemming from the country’s efforts to combat illegal fishing and preserve their marine resources. In recent months, as a result of these sanctions, the Naira has gained nearly 20% against the USD and is currently at its highest value since the end of last year.
The rising value of the Naira presents a lucrative buying opportunity for short-sellers, especially those who have a bullish outlook for the country. Short-selling the Naira, while not necessarily easy, is certainly possible, and a number of platforms and brokers offer the ability to do so, like eToro and CryptoTrader+. Short-selling provides the opportunity to profit from the recent appreciation in the value of the Nigerian currency, while also allowing the investor to study the country’s economy and political situation, without having to wade through reams of uninteresting, in-depth articles, as is often the case with most news publications.
Ultimately, the decision to short-sell the Nigerian Naira, or any other cryptocurrency for that matter, comes down to risk tolerance and profit expectation. The risk-averse may want to shy away from short-selling, as the value of any cryptocurrency can quickly plummet if the market decides that the underlying value of the coin is not as advertised. Those seeking to make a quick buck may find that short-selling, although incredibly easy, is not necessarily an easy way to make money, as the value of their investment can fluctuate widely, up or down, as the case may be.