The Crypto Landscape Shifts: 3 Practical Tips for Protecting Your Profits
A New Era for Cryptocurrency
The recent launch of exchange-traded funds (ETFs) for Ethereum in the United States has sent Ether soaring more than 20% since May 20, knocking Bitcoin off its top spot. While this development is bullish for crypto as a whole, it’s essential to understand that it may not necessarily be beneficial for BTC in the short-term. As Ethereum dominates the market’s narrative in the coming months, expect BTC to retest prior price support levels.
Tip #1: Realize Ether ETFs May Not Be Bullish for Bitcoin
The greenlight for Ether ETFs is a significant milestone for crypto, but it may not be the game-changer some people think it is. With Ethereum’s growing influence, BTC will likely experience increased volatility, making it essential to reassess your investment strategy.
Understanding the Impact of Ether ETFs on Bitcoin
While Ethereum’s ETF launch is undeniably positive for crypto, its effects on Bitcoin are more nuanced. As the market focuses on Ethereum, the spotlight may temporarily shift away from BTC. This development could lead to a retest of prior price support levels for Bitcoin.
Market-Neutral Plays: A Practical Approach
Instead of placing big directional bets, consider market-neutral plays that can help you navigate the crypto landscape. One profitable strategy has been a relatively simple carry trade between BTC’s spot and perpetual futures markets. With funding rates on futures exchanges soaring north of 20%, contrarians have been cashing in by shorting BTC perpetuals while offsetting risk in the spot markets.
The Covered Strangle: A Sophisticated Trade
For a more advanced approach, investment research firm 10x Research recommends the "covered strangle." This moderately bullish bet against extreme volatility involves holding spot BTC while selling out-of-the-money call and put options that will expire in December – at the $100,000 and $50,000 levels, respectively. The strategy offers a 17% downside buffer or 17% more yield, depending on where BTC closes in December.
Skip Self-Custody: Consider ETFs
Bitcoin’s reputation as an inflation hedge is hardly relevant if scams and exploits drain your wallet to zero. Hence why self-custody, venerated by maxis, is a no-go for all but the most tech-savvy holders. More than $27 billion has been drained by exploits to-date, or more than 1% of crypto’s total market capitalization. The hit-rate for retail holders is even higher.
The Risks of Self-Custody
While some may argue that self-custody provides a sense of security and control, the risks associated with it are significant. With over $27 billion lost to exploits, it’s clear that this approach can be detrimental to your investment portfolio. Consider alternative options that prioritize security and cost-effectiveness.
The Safest Option: Longing BTC Futures
Longing BTC futures on established platforms like the Chicago Mercantile Exchange (CME) offers a safer option for investors. Cash-settled futures are immune to exploit risk, and bite-sized BTC Micro Futures closely mirror spot positions. However, routinely rolling expired contracts adds considerably to complexity and costs.
The Best Bet: Bitcoin Spot ETFs
Like it or not, Bitcoin spot ETFs really are the best bet for most holders. With carefully-vetted custodians and expense ratios of 0.25%, BlackRock’s iShares Bitcoin Trust (IBIT) and the Fidelity Wise Origin Bitcoin Fund (FBTC) strike an attractive balance between security and cost.
The Boom in Copper: A True Long-Haul Inflation Hedge
The best Bitcoin play may not involve Bitcoin at all. Forget about digital gold – for a true long-haul inflation hedge, consider copper (yes, the metal). Copper’s correlation with Bitcoin surpasses practically every other commodity. It has compelling use cases (such as wire and penny production), and having been with us since the Neolithic period, is unlikely to be displaced by a rival smart contract network.
Copper vs. Bitcoin: A Comparison
On the flip side, Bitcoin’s correlation with technology stocks has been steadily waning. Gone are the days of BTC as a leveraged bet on the NASDAQ. Copper futures, among the most liquid and capital-efficient in the market, trounce BTC as a serious inflation hedge.
The Future of Crypto: Thinking Beyond Bitcoin
A new era for cryptocurrency is upon us, and it’s time to begin thinking beyond Bitcoin. With Ethereum’s growing influence and the boom in copper, investors must reassess their investment strategies to ensure they remain relevant in this shifting landscape.
Conclusion
The recent launch of Ether ETFs has sent shockwaves through the crypto market, but it’s essential to understand its implications for Bitcoin. By considering market-neutral plays, skipping self-custody, and exploring alternative investments like copper, you can navigate this new era with confidence.
Author’s Note
Alex O’Donnell is a guest columnist for Cointelegraph and the founder and CEO of Umami Labs. Prior to Umami Labs, he worked for seven years as a financial journalist at Reuters, where he covered M&As and IPOs.
This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.