Understanding Crypto Dynamics: Ethereum's Rise and Bitcoin's Alternatives Unveiled
Summary:
The article discusses shifting dynamics in the cryptocurrency market with Ethereum's ETFs launch in the U.S., causing Ether to rise by over 20%, overshadowing Bitcoin's performance. It offers three tips for crypto traders in this changing landscape: acknowledging that Ether ETFs' success may not be bullish for Bitcoin, considering market-neutral trades, and avoiding self-custody to minimize scam and exploit risks. The article also suggests that the best Bitcoin strategy might not involve Bitcoin but rather focus on copper futures as a long-term inflation hedge.
The reigning champ of cryptocurrency has lost its crown. Cryptocurrency Ethereum's long-anticipated exchange-traded funds (ETFs) launch in the U.S. resulted in the formidable Ether (ETH) climbing over 20% since May 20, leaving Bitcoin's (BTC) performance wanting in comparison. Yet, potential ways to back the reigning giant of crypto still prevails, though not all are compelling enough. If you are a staunch Bitcoin maximalist, this isn't the advice you seek: you're assured the U.S. dollar is barely holding on and a $200,000 BTC is inevitable. However, for the rest, here are three practical measures to secure your crypto gains when it starts losing steam.
Firstly, do not presume that Ether ETFs equate to Bitcoin growth. Ether ETFs approval is certainly an advancement for all cryptocurrencies, but BTC may not directly benefit, particularly in the immediate future. With Ethereum gaining the spotlight in the coming period, BTC may have to reassess its previous price support zones.
Instead of making significant directional moves, considering market-neutral trades could be more fruitful. One of the most successful methods this year has involved a rather straightforward carry trade within BTC's spot and perpetual futures markets. With Bitcoin enthusiasts reinforcing long positions, futures exchanges' funding rates have skyrocketed more than 20%.
For a more intricate trade, investment analysis company 10x Research advises utilizing a "covered strangle". This slightly bullish wager against extreme volatility involves maintaining spot BTC while selling outgoing call and put options, set to expire in December - at the $100,000 and $50,000 stages, respectively. This strategy provides a "17% downside buffer or 17% more yield, depending on where BTC sits in December," says 10x Research.
Maintaining Bitcoins' honor as a long-term inflation shield won't bear any significance if you suffer losses from scams and exploits. That's why self-custody, revered by maximalists, might not be a satisfactory solution for those less tech-savvy. Theft and exploits have resulted in losses surpassing $27 billion to date, which represents more than 1% of the entire crypto market value.
The optimal method is longing BTC futures on reliable platforms, for instance, the Chicago Mercantile Exchange (CME). Cash-settled futures are impervious to exploit risks. However, the process of frequently rolling expired contracts can be quite complex and expensive. Thus, Bitcoin spot ETFs seem to be the most viable option for majority holders.
The most effective Bitcoin strategy might not involve Bitcoin whatsoever. Forget the concept of digital gold and consider a real long-term inflation shield: Copper. Copper's ties with Bitcoin exceed that of almost every other commodity and has solid use-cases, such as wire and penny production. Furthermore, Bitcoin's association with tech stocks has been steadily decreasing, eliminating the concept of BTC as a leveraged bet on the NASDAQ. Copper futures, widespread and capital-efficient, outrank BTC as a serious inflation barrier and offer better risk-adjusted returns.
There's no denying that Bitcoin led the charge in the crypto world; however, being the last one to make a move is equally important. With the recent U.S. approval of Ether ETFs, Ethereum is prepared for institutional takeover. It's time Bitcoin maximalists considered alternatives to Bitcoin.
Published At
5/24/2024 11:30:50 PM
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