Cryptocurrency’s top performer has been dethroned from its position. The highly anticipated launch of Ethereum exchange-traded funds (ETFs) in the United States has caused Ether (ETH) to surge by over 20% since May 20. In comparison, Bitcoin’s (BTC) performance looks lackluster. While there are still opportunities to invest in the leading cryptocurrency, not all of them are worth pursuing.
If you are a die-hard Bitcoin supporter, you probably believe that the U.S. dollar is on the verge of collapsing and that BTC will soon reach $200,000. However, for those who are not as convinced, here are three practical tips for safeguarding your crypto profits once this bull run loses momentum.
Firstly, it’s important to realize that the approval of Ether ETFs may not necessarily have a positive impact on Bitcoin. While it is a bullish development for the overall crypto market, Bitcoin may face challenges in the short term as Ethereum takes center stage. This could result in BTC retesting previous price support levels. Rather than making big directional bets, consider market-neutral strategies. One such strategy is the carry trade between BTC’s spot and perpetual futures markets, which has proven to be profitable this year. Contrarians have been capitalizing on this by collecting payments for shorting BTC perpetuals while offsetting the risk in spot markets.
For a more advanced trading approach, investment research firm 10x Research recommends the “covered strangle” strategy. This strategy involves holding spot BTC while selling out-of-the-money call and put options that expire in December at the $100,000 and $50,000 levels, respectively. This strategy offers a downside buffer of 17% or an additional 17% yield, depending on where BTC closes in December.
Secondly, it is advisable to avoid self-custody of your crypto assets. While self-custody is preferred by Bitcoin maximalists, it is not suitable for most holders who are not tech-savvy. Numerous scams and exploits have drained over $27 billion from the crypto market, accounting for more than 1% of its total market capitalization. Retail holders are particularly vulnerable to these risks. The safest option is to invest in BTC futures on established platforms like the Chicago Mercantile Exchange (CME), as cash-settled futures are immune to exploit risks. BTC Micro Futures closely mirror spot positions. However, the complexity and costs of regularly rolling expired contracts should be taken into consideration.
Bitcoin spot ETFs are also a viable option for most holders. ETFs such as BlackRock’s iShares Bitcoin Trust (IBIT) and the Fidelity Wise Origin Bitcoin Fund (FBTC) offer a good balance between security and cost, with carefully-vetted custodians and expense ratios of 0.25%. However, it’s important to note that bid-ask spreads and trading premiums can affect returns, and custodians’ partial reliance on hot wallets introduces exploit risks.
Lastly, consider diversifying beyond Bitcoin and explore other investment opportunities. One such option is the booming copper industry. Copper has a strong correlation with Bitcoin and has compelling use cases in various industries. It is unlikely to be displaced by a competing smart contract network. Copper futures, which are highly liquid and capital-efficient, outperform BTC as a reliable inflation hedge while delivering superior risk-adjusted returns. Bitcoin may have been the first mover in the crypto space, but it’s the last-mover that ultimately counts. With the approval of Ether ETFs, Ethereum’s institutional adoption is expected to soar, making it a good time for Bitcoin maximalists to start considering alternatives.
In conclusion, protecting your crypto profits requires careful consideration and strategic thinking. By being aware of the potential impact of Ether ETFs on Bitcoin, avoiding self-custody, investing in BTC futures or spot ETFs, and exploring alternative investments like the copper industry, you can safeguard your crypto assets and maximize your returns.
Disclaimer: The information provided in this article is for general informational purposes only and should not be considered as legal or investment advice. The views expressed are solely those of the author and do not necessarily represent the views of Cointelegraph.