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How to Trade Crypto Volatility

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Cryptocurrency is a popular method for those who want to hedge against or profit from increased volatility. This article will discuss how to trade Bitcoin futures and options to protect your investments. You should use these strategies in conjunction with each other for the best results. 

Here are some basic rules you can use to make smart trades in the market.
Weigh your risk and reward ratio carefully before trading. Always remember that there is no “one size fits all” method, so it's important to do your own research.

Using Bitcoin futures to hedge against or profit from higher levels of volatility

A good way to protect against a rise in cryptocurrency price volatility is to buy Bitcoin futures contracts. Futures contracts involve an agreement between a buyer and seller on a specific amount of money at a future date. They usually have similar terms, and are very popular among cryptocurrency traders. Futures contracts can help traders predict price movements and market sentiment by using historical data. 

They may also be used to profit from price increases or losses when the price changes. Another way to hedge against and profit from higher levels of crypto volatility is to use Bitcoin futures. These are contracts between a buyer and a seller, and are settled in USD. However, you can buy Bitcoin futures for any currency you wish, such as EUR, USD, or other major currencies. 

For example, if you hold one BTC that is worth $60000, and you want to lock in that price, you could buy 60,000 contracts in the futures market. But if the price is higher than 60000, you would have to sell the bitcoin futures contracts. As a general rule, using Bitcoin futures to profit from or hedge against rising cryptocurrency prices is risky. 

The implied volatility in futures contracts is high, so trading on higher levels can amplify your losses. Bitcoin futures are typically priced and expire at 4:00 pm London time on the last Friday of the month. You should always carefully consider your investment strategy and investment goals before deciding on any particular strategy.

In addition to Bitcoin futures, you can buy other types of cryptocurrencies like Ethereum or Litecoin to protect your investment. However, it's vital to be aware of the risks involved. Because they are volatile, you must be prepared for sudden price drops or long-term holdings. A popular phrase in cryptocurrency groups is “Hold On for Dear Life,” a phrase which describes the high level of crypto volatility.

The most advanced way to hedge cryptocurrency is by short-selling. Short-selling involves selling an asset when you think it will decrease in value, and then buying it back later at a lower price. The difference in price is the profit for the trader. A short-selling strategy can be beneficial for both long and short-term traders. While a short-selling strategy may be risky, it can help protect both sides of a trade.

While trading in cryptocurrencies can be profitable, you need to know that the market is incredibly volatile and sudden price swings are common. Dogecoin, for example, spiked up in January 2021, only to plummet by 72% the next day to $0.022, before gaining popularity and price. This type of volatility is the reason why many crypto traders view it as a golden opportunity for profit, and are exposed to the risk of massive losses.

Using Bitcoin options to hedge against or profit from higher levels of volatility

There are several advantages to hedging against or profiting from higher levels of crypto volatility. Cryptocurrency are constantly fluctuating, and much of this is driven by the actions of investors. There are several Bitcoin whales who hold substantial positions, but cannot liquidate them without impacting the market price. For instance, if these whales suddenly sold their positions, Bitcoin prices would plummet.

IG is a trading name of IG Markets Limited, a financial services firm. The opinions expressed on this page are not intended as an offer, solicitation, or investment advice. Investors should seek professional advice before making any investment decision. IG does not assume responsibility for any use or misuse of the information contained on this page. 

All information is subject to change without notice. Using Bitcoin options allows an investor to profit from or hedge against higher crypto prices. Using Bitcoin options is a great way to profit from higher levels of crypto volatility without borrowing or selling bitcoin. As long as a short position covers the loss from the initial position,
hedging against higher levels of volatility is a good way to increase your profits. 

It allows you to profit from rising prices and minimize the risk of losing your original position. Despite the risks associated with Bitcoin, many investors do not use Bitcoin as a risk-diversifier. This is because the excess volatility of this currency is not enough to make it an appropriate risk diversifier for a portfolio. In fact, hedging against Bitcoin is the most effective way to profit from this asset class. However, there are several downsides to this strategy.

Investing in cryptocurrencies is a complex . While the market is relatively small, the volatility of crypto-assets is increasing daily. As a result, investors need to consider various factors before selecting a strategy. While hedging, the investor should consider the underlying position and its volatility. Using Bitcoin options to hedge against or profit from higher levels of crypto volatility is a profitable strategy for those who want to protect their investments and minimize risks. 

In a bitcoin option, the investor pays a premium to receive the right to buy or sell the currency. Unlike a traditional call or put option, a bitcoin option is valued on a true or false basis. If the underlying currency is above a certain level, the investor will receive a payment, while if it falls below that level, the option pays nothing. Conversely, if the price drops below the level, the investor will have to purchase the underlying again

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