How to Trade Cryptocurrencies

Bitcoin, Cryptocurrency, Trade War
by Rick Rouse

I am often asked about cryptocurrencies and if they are safe investments to add to a portfolio. For investors unfamiliar with the term, a cryptocurrency is basically a digital token, or coin, which trades on a distributed and decentralized ledger called the blockchain.

The best-known and most popular cryptocurrency is Bitcoin. It debuted in 2010 and dominates cryptocurrencies in terms of market capitalization and user base. It has been truly fascinating to watch the rise of Bitcoin, which first traded at just a fraction of a penny in 2010 and reached all-time high price of more than $68,000 in November 2021.

Bitcoin has become extremely volatile over the years and currently trades for about $41,000. It is trying to form a near-term base after topping out in late March above $48,000.

Other cryptocurrencies, such as Ethereum, Litecoin, Cardano, Dogecoin, and Polkadot, represent an alternative to Bitcoin and have garnered renewed optimism. However, there are literally thousands of cryptocurrencies available to trade, with each carrying their own set of risks and rewards.

There are a number of platforms available on which to trade cryptocurrencies, with the most popular being Coinbase and Cash App. The cryptocurrency industry has seen its share of fraudulent coins and shady exchanges, but Coinbase (COIN), which is a publicly traded company, has largely avoided any controversy.

Another option, Robinhood (HOOD), offers an extremely easy-to-use app with no commission fees. Once you choose your trading platform, all you need to do is fund your account, pick a currency, and do your homework.

Of course, the safety of these platforms is else something to consider as the cryptocurrency industry can be vulnerable to hackers and the occasional temporary delay in trading.Of course, the safety of these platforms is else something to consider as the cryptocurrency industry can be vulnerable to hackers and the occasional temporary delay in trading.

While Coinbase and Robinhood represent alternative stock investments, one of my favorite ways to trade Bitcoin indirectly is through the Grayscale Bitcoin Trust (GBTC). It is basically an exchange-traded fund that invests in Bitcoin and mirrors the price action

The chart below shows that GBTC recently made a move back above its 50-day moving average, with key resistance at $32.50. Support is at $27.50 should shares fade from current levels and close back below $29.

You can also trade Grayscale’s Ethereum Trust (ETHE) which also appears to have made a near-term bottom.

GBTC and ETHE do not trade options, but provide great ways for investors who like to trade stocks to participate in Bitcoin and Ethereum. Plus, you can directly trade these two through your brokerage account without having to worry about opening another account to fund cryptocurrencies.

Author: Rick RouseRick uses “cheap” slightly out out-of-the-money call and put options. His recommendations are based on both a fundamental and technical analysis. Rick has shown how just a 5%-10% move in a stock can generate consistent 100% winners in a short time period within 2-6 weeks. He uses tight Limit Orders and Stop Limits to get his members into bullish and bearish trades while protecting profits and limiting losses. He is not a bull or a bear as he believes you can make just as much money in an up market as you can in down markets.