Temporarily Lock in the Dollar Value of your Bitcoin

How to Hedge your Cryptocurrency Portfolio with Abra

Updated March 2022.

Do one of these scenarios apply to you?

You’ve generated gains in Bitcoin (BTC) that you’d like to temporarily lock in.
You’ve been paid in Bitcoin (via salary, ICO, or an online marketplace) and would like to lock in the USD value of your Bitcoin.
You sense the market is falling and you’d like to temporarily move your Bitcoin to USD.
You want to temporarily convert Bitcoin to USD without a bank account.

With Abra, you can easily exchange your bitcoin into USD (or PHP, EUR, CHF, etc), and then back into BTC or ETH when you’re ready. When you store USD on the Abra app, you can also withdraw those funds to a connected bank account (available only in the U.S. and Philippines and with specific limits on withdrawal amounts).

CAPTURING THE DOLLAR VALUE OF YOUR BITCOIN

Here is an example (with 1 BTC = $10,000, to keep our example simple):

Download Abra and complete sign up (make sure to write down your recovery phrase!)
Transfer 1 Bitcoin (BTC) to Abra from an external wallet. Your total Abra portfolio balance is now $10,000.
You instantly exchange 1 BTC into $10,000 USD (or any of the 50+ fiat currencies Abra supports) because you want to protect against a BTC market downturn. Your total Abra portfolio balance is $10,000.

THE PRICE OF 1 BITCOIN DECREASES TO $5,000

Your Abra portfolio balance is still $10,000, because you converted your funds to USD.
You feel the dip is a good buying opportunity so you exchange your USD back into BTC. Your Abra portfolio balance is now worth 2 BTC, because 1 BTC = $5,000.

THE PRICE OF 1 BITCOIN INCREASES TO $12,000

Your Abra portfolio balance is now worth $24,000 (2 BTC x $12,000). By converting into USD and then back into BTC at a later date, you now have $12,000 more than if you had just held BTC. At this point, you may decide to lock in the appreciation again by moving funds to USD, or diversify into other cryptocurrenies; ETH, for example.

Your Bitcoin and USD funds are stored directly in your wallet on your Abra App. Your USD balance is based on Abra’s digital currency contracts. With Abra, you are in control of your money at all times. (You can learn more on our website about why we believe this security model is superior to your funds being held on exchanges.)

Feel free to comment below.

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Disclaimer: Abra is not a financial advisor. This post is for information purposes and not intended to be financial advice. Abra makes money on exchange currency transactions within our app.

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Written by

Matt Taylor

About Abra

Established in 2014, Abra is on a mission to create a simple and honest platform that enables millions of cryptocurrency holders to maximize the potential of their assets. Abra enables both individuals and businesses to safely and securely buy, trade, and borrow against cryptocurrencies – all in one place. Abra’s vision is an open, global financial system that is easily accessible to everyone.

Why Abra

Based in the United States, Abra is available in over 150 countries and makes it easy to convert between crypto and a wide variety of local fiat currencies. With over 2MM customers, $7B in transactions processed, and $1.5B in assets under management, Abra continues to grow rapidly. Abra is widely loved and trusted – in April 2022, pymnts.com reviewed and rated Abra amongst the top 5 most popular crypto wallets in the market. Abra is backed by top-tier investors such as American Express Ventures and First Round Capital.

How Abra Protects Your Funds

Abra places clients’ financial objectives and security first. Abra practices a culture of risk management across all levels and functions within the organization.

Abra employs a state-of-the-art enterprise risk management framework that comprises a comprehensive set of policies, procedures, and practices detailing all applicable risk-related objectives and constraints for the entirety of the business. Abra has instituted a complete set of requisite systems and controls that continuously enforce these policies, procedures, and practices to manage all operations, including credit and lending. Abra’s independent Risk Committee comprises experienced compliance, risk, securities, and fraud operations professionals with backgrounds in industries ranging from traditional and digital assets banking, payments, remittance, to fintech.

Please visit our FAQ to learn more.

Russell

1552 days ago

Hello,
You use the word “exchange” into and out of various cryptocurrencies in the Abbra App. My question is, each and every time you do an exchange, is this considered a sale out of one, and a purchase into another one? If so, each “exchange” is a taxable event. Do I understand this correctly?

ZIO

1554 days ago

Is transferring BTC into a synthetic USD pair, a US taxable event?

Hi Zio,

Abra does not give out tax advice regarding exchanges of assets within the app. However, we do provide a transaction report that you can share with a tax professional that will help you determine what your tax obligations are when you report gains/losses.

Tooraj

1555 days ago

I have had a look at the fees but not sure how they would apply to the example above. I think the example above attracts no fees. Please confirm.

Micah Insley

1616 days ago

Probably an easy way to so this but i cant find it. I added a cryptocurrency to my wallet “stellar”. and decided i dont want to invest in it. How can i remove it from my list of cryptos that are in the walet.

1612 days ago

Tap the wallet icon in the right-hand corner on the main portfolio screen. You should be able to select the wallets you want to view/not view in your portfolio.

Brian

1625 days ago

Are there TAX ramifications for switching back and forth between crypto and fiat USD?

1623 days ago

See the tax section of our FAQs for more details: https://support.abra.com/hc/en-us/categories/360000280872-Taxes

Also please seek advice from a qualified tax professional.

Jim Jeffries

Can you answer the question please? Is this a taxable event or not? Those links to your ‘tax’ section do not answer the question and that is clearly what everyone will want to know.

Hi Jim,

Abra cannot give out specific tax advice. However, we provide a transaction report that you can share with a tax professional to determine what your tax obligations are when reporting gains/losses.

Wendell morris

1629 days ago

How can funds be stored in cash if when transferred to Abra, it is immediately turned into bitcoins?

1628 days ago

Hi Wendell,

All the digital assets we list on our site are synthetic representations backed by BTC and LTC smart contracts. However, the amount of USD will remain stable and pegged to the USD value. That’s why it’s a hedge against the BTC market volatility.

A May

Hi Matt,

I think the idea is great and after Tether distrust started spreading, I’m wondering…is it possible for an Abra consumer to “trust but verify”? In other words, has a third party audit been conducted and published, or is here another way to verify the investment pegging?

1626 days ago

Hi Andrew,

Later this year, we will be migrating to a full 2 of 3 multi-signature smart contract solution that will enable a contract Oracle to sign in lieu of either counterparty. This should provide the transparency you’re looking for. More info about our contract model here: https://www.abra.com/blog/abra-launches-new-multi-signature-wallet-holding-digital-assets-using-bitcoin/

Geoff

1630 days ago

Does Abra work only as an app on smart phones? or also on desktop?

The Abra app is available only on iOS and Android currently.

Cosmin

1632 days ago

Hi, what does Abra use as the index prices provider for the various pairs?

Abra gets its digital asset prices from live mid-market rates.

CharlieRuiz

Can do do the same Crypto to USD exchange using Litecoin or DigiByte?

Yes! You can hedge into USD from any of the cryptocurrencies we offer on our platform.

yes t

1633 days ago

can we now send another eth wallet to abra eth wallet?

Not yet. Currently, you can send in and out BTC to Abra.

Jen

Is there a way to control the network fees, ie (send lower fees but expect longer transfer time or higher fees for faster transactions)?

Hi Jen,

Not yet. This is on our roadmap though.

Peter Viglis

1634 days ago

Is there a daily or transaction limit to the amount of Bitcoin I can hedge against a synthetic currency within Abra?

For example if I transfer 20 BTC = $200,000 USD to Abra, and I want to immediately convert my 20 BTC to USD or Euro when 20 BTC = $400,000 USD, will I encounter limitations based on the size of the transaction?

Also, is there a daily or transaction limit to the amount of Bitcoin I can exchange for the purchase of synthetic cryptocurrencies within the Abra app?

Many thanks
Peter

So when moving from BTC to synthetic USD (or any fiat currency on our platform) there are no limits. However, if you want to exchange BTC for another cryptocurrency or want to move funds outside of Abra into USD in your linked bank account, we have limits. See here: https://support.abra.com/hc/en-us/articles/115002918627-What-are-Abra-s-transaction-limits-

Stuart

1640 days ago

Presumably with the way in which the Abra smart contracts work mean that in future you might be able to transfer to other stores of value (thinking specifically of precious metals such as gold or silver) in order to hedge both crypto and fiat currency risk? I know you guys probably have a lot on your plate with launching the app at the moment (and well done for doing so – great functionality!), but are there any plans to offer other “non-currency” assets at a later date?

We don’t have any specific dates yet, but we are definitely looking into listing other asset classes, as our synthetic contracts are applicable in more traditional markets. 🙂

Don

1645 days ago

What is the time frame for exchanging crypto to U.S. and back. Instant?

1644 days ago

Very quickly. Although it depends on the mining fees at the time of the transaction.

Marc F

1653 days ago

Hi Abra,

I’m a little concerned about the Abra Wallet, but maybe understanding is off?

Is the User the only party who has their own Private Key for their Abra Wallet?

How do we export our Private Key? If Abra goes bust, we can’t access our Crypto/Funds because our Private Key will only work in Abra Ecosystem…?

What if we’ve switched our Bitcoin into USD to hedge our position, and then worst case scenario, Abra goes bust etc. Do we still actually own our underlying Bitcoins AND able to recover them somehow?

I would love to use the product, but I’m just concerned about Product Risk.

Best,
Marc

1650 days ago

We currently do not have a way to export your private key, but when you sign up you will get a recovery phrase which you will be able to use to recover your funds if Abra ceases to exist with another wallet. Learn more here: https://www.abra.com/safety/

Dan0

1649 days ago

The question on hedging against a full company failure is a fair question. If Abra ceases, is there any recourse from the wallet holder if the platform is unavailable?

1648 days ago

Yes, see response above. You will be able to use your recovery phrase on other platforms to recover your funds.

Michael Buhs

What other platforms? This is not on the response above, just the fact that you can re-download the application. If the application ceases to exist, how would you have access to your funds? What am I missing here?

Hey Michael,

You can take the recovery phrase in the security menu (remove the first word) and enter the phrase into any BIP 32 compatible wallet recovery input. You’ll see the private key. This is not recommended as there is no standard way to access a multisig p2sh wallet between vendors. Does that make sense?

So even if Abra ceases to exist. You can still export via the recovery phrase.

Daniel Garcia

How long does it take to convert Bitcoin to USD wallet within Abra? What fees are involved?

Hi Daniel, here are Abra’s fees: https://support.abra.com/hc/en-us/categories/203973548-Fees

Edmund Mercado

1671 days ago

Are you hedging or transferring the amount to USDT (tether)?

1670 days ago

Hi Edmund,

We do not use Tether. 🙂 You can learn about how Abra works under the hood here: https://www.abra.com/blog/abra-launches-new-multi-signature-wallet-holding-digital-assets-using-bitcoin/

Doug

Isn’t it actually a Litecoin-based smart contract now?

Yes, our model actually uses both BTC and LTC!