3 Tips to Safeguard Bitcoin Gains During Ethereum ETF Craze

Ether’s recent surge in value has displaced Bitcoin from its leading position in the cryptocurrency market. This shift followed the much-anticipated introduction of exchange-traded funds (ETFs) for Ethereum in the United States. Since the launch around May 20, Ether’s value has increased by more than 20%, while Bitcoin’s performance has been comparatively lackluster. Despite Bitcoin’s dip in prominence, opportunities for investment still exist, but caution is advised as not all are worth pursuing.

For those who are staunch Bitcoin supporters, often referred to as “Bitcoin maxis,” this might be a good stopping point. The conviction that the U.S. dollar is nearing its collapse and Bitcoin is set to skyrocket to $200,000 remains unshaken among this group. For other investors, there are practical strategies to help safeguard crypto gains as the current bull run begins to lose momentum.

To start, it’s important to understand that the introduction of Ether ETFs doesn’t necessarily bode well for Bitcoin, particularly in the short run. With Ethereum taking center stage in market discussions in the coming months, Bitcoin may likely revisit previous support levels. Instead of making hefty directional bets, more measured, market-neutral strategies can be considered. One effective approach this year has been a carry trade between Bitcoin’s spot and perpetual futures markets. With Bitcoin enthusiasts doubling down, the funding rates on futures exchanges have exceeded 20%, allowing contrarian investors to profit by shorting Bitcoin perpetuals while balancing risk in the spot market.

For a more advanced trading strategy, investment research firm 10x Research advocates a tactic known as the “covered strangle.” This nuanced strategy involves holding Bitcoin spot positions while selling out-of-the-money call and put options set to expire in December, at $100,000 and $50,000 respectively. According to 10x Research, this provides either a 17% downside buffer or a 17% additional yield, contingent on Bitcoin’s closing price in December.

Another piece of advice is to avoid self-custody of Bitcoin if you’re not highly tech-savvy. The allure of self-custody, often touted by Bitcoin purists, fades quickly when considering the risks. Over $27 billion has been lost to exploits, or roughly 1% of the entire cryptocurrency market’s capitalization. For individual holders, the risk is even greater. A safer bet lies in longing Bitcoin futures on reputable platforms like Chicago Mercantile Exchange (CME). Cash-settled futures eliminate exploit risk, and smaller BTC Micro Futures closely emulate spot positions. Yet, managing these contracts can become complex and costly over time.

For many investors, Bitcoin spot ETFs might actually be the most secure and straightforward option. These ETFs, such as BlackRock’s iShares Bitcoin Trust (IBIT) and Fidelity’s Wise Origin Bitcoin Fund (FBTC), offer a good mix of security and cost-efficiency, with trusted custodians and low expense ratios. It’s worth noting that bid-ask spreads and trading premiums can affect returns, and dependence on hot wallets by custodians still presents some exploit risks.

Not all profitable Bitcoin investments need to involve Bitcoin directly. For those seeking a long-term hedge against inflation, copper (the metal) can be an interesting alternative. It shares a higher correlation with Bitcoin than most other commodities and offers practical applications like wire and coin production, making it a stable investment. Unlike Bitcoin, copper’s correlation with technology stocks hasn’t wavered significantly, providing more stable inflation protection and favorable risk-adjusted returns.

While Bitcoin was the pioneer of cryptocurrencies, the landscape is shifting with Ethereum’s growing institutional adoption following the recent approval of Ether ETFs in the U.S. This opening presents a crucial moment for Bitcoin enthusiasts to consider diversifying beyond Bitcoin. Ether’s institutional growth signals potential wider acceptance and usage, making it an integral asset to watch in the evolving crypto market landscape.