Bitcoin bubbles have a tendency to be so volatile and unpredictable, despite their historical occurrence, that they often leave traders traumatized and drained of confidence. After being raked through the coals by the latest ups and downs, those who witness Bitcoin at historical bottom-barrel prices may miss a years-in-the-making opportunity to buy in at the best possible moment. However, this dilemma is by design. Hesitance is bred on the tail-end of a bubble, when a logical market would otherwise look at the charts and be quite optimistic.
Despite that there’s always a way to derive value from cryptocurrency speculation, Bitcoin is now a mature and known entity, and navigating the markets is therefore not as straightforward as it was in 2011. Back then, no one knew if Bitcoin would still exist the following year, and so investing your money was tantamount to setting it on fire. Fast forward a few years, and this pioneering spirit paid off in excess of 5,000%, with Bitcoin now enjoying its status as the gold standard of cryptocurrency integration.
Traders in 2019 who are looking to reproduce a similarly lucrative opportunity must tolerate the same levels of uncertainty as Bitcoin evangelists did nearly a decade ago. While veterans risked it all just by investing in cryptocurrency, savvy traders in today’s market are embracing new and unproven blockchain technologies to gain an edge. They see these new platforms and cryptocurrency concepts as a way to hitch their wagon to a star that may one day fly as high as Bitcoin’s.
Exchanges Pivot to Profits
Cryptocurrencies have encountered significant growing pains, and the way that regulators have dealt with these issues has effectively stifled the ability for investors to participate. Whereas it was once popular to sign up for an exchange and dump your money into Bitcoin, exchanges are now fraught with verification obstacles, taxation and data collection mandates, and a dwindling supply of assets. Accordingly, traders who still want to dabble in new altcoins worth fractions of a cent, trade anonymously, and hold their own private keys are flocking to decentralized exchanges (DEX).
A DEX is a newer idea whereby the entire exchange and all its operations are supported by peers, rather than centralized servers. Traders using a DEX aren’t limited by withdrawal or deposit fees, downtimes, sparse listed assets, or fake liquidity. Instead, a DEX resembles how Bitcoin trading appeared in its earliest days. Participants are able to quickly move their cryptocurrencies through the ecosystem, assert secure custody over them, exchange them endlessly for new and highly volatile altcoins, and avoid having their data delivered into the waiting arms of regulators.
Another way that exchanges skirt regulations, thereby resurrecting new investment opportunities for inquisitive traders, is a called the Initial Exchange Offering (IEO). Where the most explosive investment opportunities of 2017’s bull run were ICOs (Initial Coin Offerings), regulators clamped down hard on these blockchain fundraising events after it was demonstrated that many of them were fraudulent. Though fraud was indeed rampant, investors in some of the more successful ICOs were rewarded with ridiculous return on their crypto capital, and the same chance is presented to participants in the new generation of IEOs.
Traders vigilant of upstart IEO platforms like Binance Launchpad will also be the first to invest in the more compliant, supervised crowdfunding of new blockchain startups through exchanges. A preeminent example is BitTorrent Token (BTT), which was launched this year through an IEO and experienced resounding success. This shows that those willing to embrace new blockchain ideas will make it through the bear market unscathed — and probably in a better position to welcome the coming bulls.
Trading Technology Helps Mobilize Crypto Capital
A maturing cryptocurrency ecosystem is no longer merely about buying and selling cryptocurrencies for fiat money. New financial products and utilities, both centralized and decentralized, offer curious traders the ability to invest with greater control over their money. For example, traders who aren’t looking to escape the eyes of regulators can dabble in a new breed of derivatives dubbed Bitcoin futures, which are available on traditional international exchanges like CBOE and CME.
By using futures, it’s possible to speculate on the value of Bitcoin without being responsible for operating a wallet, private key, or trusting an exchange to do it for you. Instead, these assets are settled in cash, saving traders from handling crypto themselves. Contracts for Difference (CFDs) are also available on margin trading exchanges, making these leveraged assets potentially potent in the hands of a savvy trader. A leveraged long on a crypto derivative will perform fantastically well if opened at the right time.
This is the extent to which a compliance-minded trader can add Bitcoin to his or her portfolio, but on the complete other end of the spectrum is MakerDAO. Traders who use the decentralized Collateralized Debt Positions (CDP) available via Maker’s smart contract platform can issue fungible stable coins (DAI is pegged to the dollar) for the ETH they lock up, thereby offering leverage without the assistance of any connected financial institutions. CDPs are still cutting-edge, and traders who master them are able to get ahead of the curve and deploy their capital with much greater efficacy. At the moment they’re one of blockchain’s killer apps, with more than 2 million Ethereum locked in.
Becoming Tomorrow’s Crypto Authorities
Unlike a decade ago, setting yourself up for a lucrative position in crypto’s future isn’t only about investing your money. It’s also about investing your time and efforts. Many of the most promising ideas in the industry, such as Ethereum’s decentralized platform for applications, can also participated in. Being aware that Ethereum will soon upgrade to a Proof of Stake model, for example, means that traders with enough ETH will be able to adopt an authoritative role in the new ecosystem. Turning your well-earned gains into a permanent Ethereum node ensures that you’ll earn a hefty sum each year just in network fees and will also have clout in a growing idea.
Blockchain is expanding quickly, and cryptocurrency is strapped in for the ride. As the official medium of blockchain’s “internet of value”, cryptocurrency cannot be extricated and is therefore finding new ways to evolve around obstacles. First-movers in this growing ecosystem a chance to master new ideas before they’re inducted into the mainstream, and this position will be able to boast of their foresight many years down the road.