If the idea of actively trading stocks scares you, you probably won’t like the high-speed, 24/7 cryptocurrency markets. But if you have the courage to take risks and aren’t afraid to ride out the ups and downs of Bitcoin’s price, there’s no reason why Bitcoin can’t be part of your long-term investment trading strategy. Advanced strategies for investing in Bitcoin
If you like the Bitcoin market, you can enhance your strategy to include Bitcoin futures, decentralized exchanges, and automated trading strategies.
Bitcoin futures, like other commodity futures, are derivatives with Bitcoin as the underlying security. Derivatives are typically riskier than investing directly in the underlying security, which means Bitcoin futures are even riskier than buying Bitcoin directly.
Although it may be riskier and requires a better understanding of cryptocurrencies, another way to buy Bitcoin is through a decentralized exchange. Unlike Kraken or Gemini, which are centralized exchanges, platforms like Exodus and Bisq allow you to connect directly with third-party buyers or sellers. Exodus does this through its app, while Bisq has software you can run on your computer to give you access to the peer-to-peer network.
While using decentralized exchanges gives you more control over Bitcoin and your trading activity, it still has some limitations.
Fees may be higher or lower than centralized exchanges depending on the currency you buy, the market rate, and how you enter the trade. If you’re not careful, it’s easy to spend more money on network fees when using a decentralized exchange. You are also more likely to make a mistake or submit the wrong wallet address because centralized exchanges take care of most of that for you. Decentralized exchanges may also offer a limited selection of cryptocurrencies and do not allow crypto options trading.
Another advanced strategy for buying Bitcoin that may not be suitable for beginner investors is using automated trading. There are many trading apps or bots, such as Cryptohopper, that have algorithms that execute trades based on market conditions. Signing up for something like this will allow the bot to make trades on your behalf to profit from small price fluctuations, but this can be risky.