Many people will tell you that volatility is the main reason why they have not yet invested in Bitcoin. Critics argue Bitcoin’s high volatility is a significant risk that could wipe out investors’ portfolios in just a few hours. On the contrary, crypto enthusiasts say that the sharp Bitcoin price swings could also benefit investors and traders. Thus, volatility is a unique quality that all crypto investors should embrace. So, how can traders leverage Bitcoin’s volatility for profits? The following article explores the various ways to take advantage of Bitcoin’s price swings.
The strategy mainly emphasizes buying and holding Bitcoin in the long term. It might be an excellent way to leverage Bitcoin’s volatility because of the projected growth. Bitcoin has undergone a meteoric rise in the last few years, and experts predict its price will continue the bull run in the future. That means Bitcoin’s value will become very high over time, enabling investors with significant holdings to make huge profits from selling their tokens in the future. However, investors and traders must maintain a watchful eye on the market and buy Bitcoin when the prices are low for future profitability. Buying bottoms also requires patience, but holding the funds will mainly depend on your investment goals.
Many traders argue margin trading is perhaps the riskiest strategy for beginners. That proposition relies on the assumption that too much leverage could induce a much quicker liquidation than anticipated. However, margin trading is becoming a popular investment strategy because of the millions of dollars at play. It entails buying and selling Bitcoin quickly to profit from the price disparities across exchange platforms. As such, margin trading requires strict market timing to know when the prices are significant enough to generate substantial returns. Large-scale crypto exchanges such as the BitIQ host several Bitcoin margins trades daily.
Dollar-cost averaging is among the safest ways to leverage Bitcoin’s volatility for-profits, recommended for beginner crypto investors and traders. Dollar-cost-averaging entails creating a schedule and investing the same amount of money over a specified duration. The strategy allows traders to streamline trading and limit losses in case the Bitcoin price falls abruptly. It also enables investors to avoid making emotional decisions based on unfounded speculations.
Stop Orders is a bit complex but, investors can still master the concept gradually. Several mainstream crypto exchanges have introduced the strategy for regular traders, with guidelines on how to go about it. Stop orders are two-fold; stop-loss orders and buy-stop orders.
A stop-loss order directs the exchange to sell a specified amount of Bitcoin if the price reaches a particular level. Placing a stop-loss order enables traders to limit their losses whenever Bitcoin prices take a drastic fall. Buy stop orders tell the exchange to purchase Bitcoin when its price hits a given limit. That cushions investors from market overreaction, allowing them to strike significant bargains on the Bitcoin price.
Some exchange platforms also allow traders to hedge Bitcoin. The approach involves agreeing now to sell your Bitcoin funds at a fixed price in the future, regardless of the market rates. That will generate huge profits if the Bitcoin prices are lower than the pre-determined rate at the time of sale. However, it would also impact a loss if the prices surge beyond the agreed rate.
There are various ways to protect your virtual assets from volatility. Margin trading, dollar-cost-averaging, stop orders, and hedging can help you take advantage of Bitcoin’s volatility. However, experts recommend buying bottoms and long-term thinking as the best strategy for leveraging Bitcoin’s volatility.