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Trading Crypto: How to Get Started

Oct 7, 2021

By: Frank Kaberna

It’s time to sideline your opinions of crypto and take advantage of the unique opportunity in front of you. An asset class worth trillions of dollars has sprouted up and developed before traders’ very eyes. Bitcoin, Ethereum, and the rest present a market so truly singular that attempts to quantify it in terms of gold, currencies, and stocks have all been thwarted by near-zero correlations.

Now, whether the $0.8 trillion dollar valuation of Bitcoin* holds in 2022 and beyond is up for debate, but active traders are often more intrigued by the ephemeral than the permanent anyway. The road to blue chip or pink sheet status is paved with potentially profitable price action.

How to Trade Bitcoin

As many traders in the derivatives space know, casting aside your opinion in the interest of letting the market decide your position can be both liberating and stress relieving. This concept is often referred to as price action, and it can go one of two ways depending on your vibe:

BTC \ Bitcoin for Contrarians

1007_sm1.png

Source: Yahoo! Finance (https://finance.yahoo.com/)


Contrarians might look at Bitcoin’s 2021 so far and see a mean reversion opportunity. BTC has doubled its value, come all the way back to unchanged, and then arrived at the middle of this range by the time of this writing all since the start of the year. Selling at an upside extreme and buying at a downside extreme has proved fruitful in a time where the same can’t be said for equities that have seemed to only move higher.

BTC \ Bitcoin for Trend Followers

1007_sm2.png

Source: Yahoo! Finance (https://finance.yahoo.com/)

Trend followers saw similar potential through a different lens. BTC making a new high early in the year only to top it a month later could have been read as a breakout to the upside, while the dip in the Spring followed by a further slide in the Summer could have been read as a breakout to the downside.

Regulated Futures on Crypto

It’s been a bumpy path to integrate this innovative market into traditional platforms for the retail trader, but products like Bitcoin futures, Micro Bitcoin futures, and the new Small Cryptocurrency futures have recently provided a bright spot given their ability to short and price transparency.

Exchange Fees for Crypto Futures

/BTC

Bitcoin Futures

/MBT

Micro Bitcoin Futures

/SCCX

Small Crypto Futures

$5.00

$2.50

$0.15

Source: CME Group (https://www.cmegroup.com/) and Small Exchange (https://smallexchange.com/)

As the asset class matures and more products pop up, contract size and fees should come down to fit the everyday person’s account. Small Crypto is a step in the right direction, and hopefully it helps the crypto holdouts to better grasp this rare moment.

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*Data from CoinMarketCap as of 9/28/21 (https://coinmarketcap.com/)

© 2021 Small Exchange, Inc. All rights reserved. Small Exchange, Inc. is a Designated Contract Market registered with the U.S. Commodity Futures Trading Commission. The information in this advertisement is current as of the date noted, is for informational purposes only, and does not contend to address the financial objectives, situation, or specific needs of any individual investor. The information presented here is for illustrative purposes only, and is not intended to serve as investment advice since the availability and effectiveness of any strategy is dependent upon your individual facts and circumstances. Trading in options, futures, and ETFs is not suitable for all investors. The risk of loss in the trading of options, futures, and ETFs can be substantial. Trading in derivatives and other financial instruments involves risk.


Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.

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