Is it the right time to get into cryptocurrencies?
Bitcoin hovering around 9000 and is up more than 20% since the beginning of 2020. So many of you might be thinking whether is the right time to enter or the right time to time enter was 2019 when markets were at their relatively low point. Some also will bear the brunt of the huge fall in crypto prices in 2018 following the all-time high in December 2017. And the answer to the question is never black and white. Though predictions for the bitcoin range from $0 to $500,000, no one can guarantee the price of any asset at any given point, let alone the bitcoin.
If the price of bitcoin is so volatile, how can one invest in Bitcoin?
Again to reiterate, NO asset class is 100% risk-free. Even sovereign bonds have defaulted. Every asset class comes with its own risk. And people who understand the risk associated with the asset class have benefited humongous from it. So rather than trying to avoid the risk, one should look at the risk reduction strategies. Most institutional traders and investors use derivatives as a tool to mitigate the risk of the underlying asset classes. Derivatives such options and futures are heavily traded in equity, Forex, and commodity markets and provide the much needed risk control for the institutions.
Derivatives can be both exchange-traded and OTC but individuals and retail traders can trade the derivatives only on exchanges and not the OTC.
Derivatives ?? Are they available for cryptos?
Yes, derivatives are available on crypto. Big US exchange groups such as CME and CBOE have launched Bitcoin futures in their respective exchanges
Also, future contracts on Bitcoin, Ethereum, and other cryptos were launched by various cryptocurrency exchanges such as Binance, Kraken, Huobi etc.
There are some exchanges such as Bitmex and Deribit, which offer only derivative contracts on cryptocurrency.
What is your favorite exchange? And Why?
Deribit is my favorite.
It is simple and easy to use if you have traded equity or forex via online broker.
The distinct feature of Deribit is the availability of
1. Perpetual Futures Contract and
2. Institutional grade option contracts.
For a spread trader , the two types of contract are the most required and favorite instruments to make and trade spreads.
And if you are anarchist and believe in decentralization, then you would love Deribit as there are NO KYC requirements and NO Fiat currency convertibility which means no government/bank can stop you from trading in this exchange. The company behind the exchange is legit and is legally incorporated in The Netherlands. All the trades are priced either in Bitcoin or Ether and PnL is also credited /debited in Bitcoin and Ether. All you need to transfer your funds to exchange wallet and start trading.
Please post in comments if you would like more about spread trading or options trading in crypto.