Trading Bitcoin And Its Derivitives


Bitcoin trading has been around for a while, and it is something we thought we should cover. In essence, Bitcoin trading is like trading any other asset or security. You make a prediction of whether the price will go up or down based on its past behavior and what the general sentiment is. Being bullish means, you believe that it will increase in value, and being bearish means, you think it will dip below the price it is currently at.

There are other options such as derivatives of Bitcoin like options and futures which are heavily leveraged positions that are basically guessing at the Bitcoin's price in the future.

This is called the expiration date. However, it is essential to note that these financial instruments are not for the faint of heart or for beginners.

There are a number of exchanges that you can trade bitcoin on. It is really up to you, but if you are new to it, then simple platforms like Robinhood and Coinbase are great.

Other Exchanges like Deribit and Coinbase Pro are also great if you really want to get deep into the world of trading cryptocurrencies. Don't worry, I will dive into each exchange in more detail later in the article.

The main reason to give trading Bitcoin a shot is that it is a great way to get a feel for the technology and get involved. Experiencing technology in a hands-on fashion instead of just reading about it can be a great way to learn.

Leveraged Positions (good or bad?)

A leveraged position in Bitcoin is the same as a leveraged position in a stock. Essentially what it allows you to do is trade with more money than you actually have. For example, on Deribit, you can trade with a 100x leverage meaning that with 10 dollars with of bitcoin you can trade the Bitcoin equivalent of 1,000 USD.

However, leverage can be a mixed bag. There is an opportunity for big profits and also an opportunity for devastating losses. The bottom line is that leverage is a tool and a fickle one at that. It is like a knife. It can make your job a lot easier, but it can also cut you if you aren't careful and fail to give it the respect that it deserves.

If it is your first time trading or even if you have traded with leverage but are new to crypto, then take your time. Give it some time and learn the market and its level of volatility before using it. I will leave you with a quote on leverage from Warren Buffet just as a fair warning. "When you combine ignorance and leverage, you get some pretty interesting results."– Warren Buffett

Do with this what you will.


Next up on the list of topics to touch on are derivatives. Derivatives are leveraged financial instruments that usually involve the future price of a given asset that it is derived from. Hence the name derivative. The two most popular forms are futures and options. These function the same as regular futures and options such as stock options or commodity futures.

"An option gives an investor the right, but not the obligation, to buy (or sell) shares at a specific price at any time, as long as the contract is in effect. A futures contract requires a buyer to purchase shares, and a seller to sell them, on a specific future date unless the holder's position is closed before the expiration date." - Investopedia

Consider these as more advanced things to dabble in once you have gotten your feet wet and have a feel for the market. It is always good to have a solid foundation to build upon, so take your time and don't rush the process. There is no sense in getting in over your head for no reason.


When It comes to exchanges, I would only ever recommend the ones I have used. Robinhood, Coinbase, Deribit, and Coinbase Pro are the three that I trust. By far, the easiest ones to use are Coinbase and Robinhood. There is no leverage, and there are no derivatives to worry about. It is the most user-friendly and low-risk option for new traders. On the other end of the spectrum, you have Deribit and Coinbase Pro.

Deribit is purely options and futures. It does these two things very well. Data is fast and easy to understand, and so are the options to buy and sell. They also charger very modest fees and won't gouge you on withdrawals. For better or for worse, it also offers 100x leverage.

This is great for making a lot of money very quickly if you do it right and losing money just as fast. Do with that what you will. The only downsides is that is all they offer, and they do not serve people from the U.S. However, as I am sure you are aware of there are always a way to circumvent that given that it is blockchain we are dealing with here.

Coinbase Pro is basically Coinbase but on steroids with a lot more options when it comes to charts as well as an order book. Also, another great feature is that All digital assets held in online storage are fully insured.

All USD balances are covered by FDIC insurance, up to a maximum of $250,000 per customer. If you are looking to trade crypto with an exchange that is similar to a lot of brokerages, then this is it.

One thing that should be noted is that with the exception of Deribit, all these exchanges will require either a government-issued ID or a social security number and sometimes both. This is just something to be aware of.


I would like to leave you with this information so that should you read this and have an interest in trading Bitcoin then you will have a general understanding of what's out there. However, I would also like to state that this should not be seen as financial advice. Instead, it should be seen as information on a subject.

Bitcoin and crypto trading, in general, is incredibly risky. It is incredibly volatile, and markets are open 24/7 year round. This means you can wake up to an account that is a fraction of what it was when you went to sleep. Trust me, I have made money doing this, but I also have been burned multiple times.

In my opinion, trading cryptocurrencies is something that should be done for educational purposes and not with the intent of becoming rich. Trading is a great way to make transactions and be intimately involved with the technology.

If you have an interest in learning more about the Bitcoin and its history before trading, I suggest checking out the documentary, The Rise and Rise of Bitcoin. I hope this helped you understand the world of cryptocurrency trading and I wish you the best of luck in the markets should you choose to give it a shot.