Today, in the world of finance and beyond, Bitcoin as the premier cryptocurrency doesn’t need much introduction. The apex crypto has gained much popularity far beyond the blockchain space and is currently disrupting the existing financial system.
From institutional adoption to government stockpile, Bitcoin is flying high as a trending asset. Thanks to its strong financial propositions, the price movement of Bitcoin comes with numerous market opportunities, even for those who do not own the asset.
One major way investors can invest in Bitcoin without owning the asset is through futures trading on exchanges. Further, this investment vehicle allows traders to bet on the price direction of a token instead of buying it.
By that, this article will thoroughly explore Bitcoin futures and discuss some other measures of making a profit from the crypto without owning it.
What is Bitcoin Futures Trading?
Bitcoin futures are financial contracts that let traders speculate on the price of Bitcoin without owning it. More so, another key feature of this trading option is how it helps investors to buy or sell BTC at a certain price on a future date.
Futures trading comes with two options. Investors can simply open a long position if they believe that the price of Bitcoin will go north. On the flip side, opening a short position indicates that the trader is betting on the price of BTC to drop.
Likewise, futures trading has three components namely, leverage, margin, and expiration. Leverage in futures trading is an option that allows traders to trade large positions with little capital.
Furthermore, margin is a common option on futures trading that mandates traders to maintain a deposit to cover potential losses. Expiration refers to the end of contracts which mostly expire every month. In some cases, they can come as perpetual.
Upside of futures trading
With futures trading, investors even without storing or holding BTC are exposed to its volatility. This implies that without private keys and a wallet, traders can make a gain in bull or bear markets via short and long positions.
Similarly, offering flexible opportunities is another reason why futures is popular as a means of trading and making a profit with Bitcoin without owning. During volatile periods, futures trading offers traders fast entry and exit opportunities.
It gives room for calculated speculation as traders can use technical analysis and pointers to make trading decisions.
That said, it is an open secret that futures trading comes with huge risk most especially with leverage. Meanwhile, to control trade loss, futures trading has a Stop-loss order that helps investors reduce their losses on wrong moves.
Other ways to make a profit with Bitcoin without holding it
In addition to futures, there are various ways to trade and make a profit with Bitcoin without exposure. Spot Bitcoin exchange-traded funds are a popular avenue as they are available through traditional stock brokers.
Bitcoin ETF operates in a way that the issuer buys BTC and stores it securely, offering it to investors as shares. The value of each share is the real-time worth of the underlying asset, Bitcoin.
By that, investors can easily invest in BTC, sell or buy them as shares. To an extent, Bitcoin ETF is a safe choice for those who prefer to invest within a regulated market.
Also, investing in Bitcoin mining stocks is a good option. In most cases, the stock value of public companies that mine Bitcoin reflects the price trends of the cryptocurrency.
Conclusion
Notably, Bitcoin futures is a good pathway to trade and profit from BTC without actually owning it. Offering good liquidity, it is an ideal pick for seasoned traders who savor volatility-driven gains.
Due to its high risk, it is advisable for new investors who are aiming to get started to choose a trusted platform. Those who prefer less risk can turn to ETFs, Bitcoin mining stocks, and blockchain equities.
While making profits, it is important that traders keep a record of their transactions and report them to tax authorities to avoid sanctions. This applies to almost all traders as crypto gains are within the tax regulation framework in most countries.
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