Trading Bitcoin vs. Nano Bitcoin Futures: Know the Critical Differences

There are several ways for traders to participate in the Bitcoin marketplace. As an example, let’s explore two distinct but very different methods:

1. Trading the actual Bitcoin
2. Trading Nano Bitcoin Futures, a financial derivative of the coin that’s 1/100th the size of one Bitcoin

What should traders consider when comparing financial products?

Ask this to a room full of seasoned traders, and you would probably get a list that resembles the one below. So, let’s compare.

1. If you can’t trade both sides of something, are you really trading? Anyone participating in the markets will most likely have both bullish and bearish feelings about the financial products they trade. So, experienced traders will always want to participate in markets they can easily go both long and short on… “easily” being the keyword here. So, looking at the actual Bitcoin and Nano Bitcoin futures, how easy is it to go short if I’m feeling pessimistic about Bitcoin?
   • Trading the actual Bitcoin – There are limited choices to shorting Bitcoin. In general, the trading of cryptocurrencies and the regulation surrounding how you can trade them vary from state to state in the US as well as from country to country. For example, some available shorting methods, like CFDs, while available overseas, are not available in the US. Some crypto exchanges do not provide for the ability to short at all. In other words, shorting the actual Bitcoin is not as easy as a trader would like it to be.
   • Trading Nano Bitcoin Futures – Using Nano Bitcoin futures, going short is a piece of cake. As easy as it is to go long by buying a Nano Bitcoin futures contract, just sell a contract to go short.
2. What am I actually trading and exactly where does the trade take place? Traders want peace of mind. For any financial products, and whether you’re investing in them for the long term or speculating for the short term, you owe it to yourself to understand all of the facts. In every case, ask yourself, “Where does it trade and who’s watching the store?”

• Trading the actual Bitcoin – Bitcoin, as is the case with all digital currencies, does not trade on a regulated exchange. Surprised? You’re not alone. A 2022 research report by the Financial Conduct Authority found that a whopping 69% of crypto traders under forty years-old, incorrectly believe that crypto markets are regulated.
• Trading Nano Bitcoin Futures – Nano Bitcoin trades on a regulated exchange, known as Coinbase Derivatives. All futures products fall under the regulation of the Commodities Futures Trading Commission (CFTC), whose goals include the promotion of competitive and efficient markets and the protection of investors against manipulation, abusive trade practices, and fraud.

• Trading the actual Bitcoin – In late 2021 and early 2022, both U.S. Federal Reserve Chairman Jerome Powell and Security and Exchange Commission (SEC) Chairman Gary Gensler have both expressed concern over lack of cryptocurrency regulation. Form your own opinion, but when both the head of the Federal Reserve and the SEC have crypto in their crosshairs, it might be enough to garner attention to the fact that change is on the way. Bottom line is that the regulation of cryptocurrency is something global leaders are debating and planning for.
• Trading Nano Bitcoin Futures – The CFTC has been regulating the futures products, exchanges, and futures brokers since 1975. Considering the uncertainty of pending regulations on the actual coin, trading the derivative, as one can do with Nano Bitcoin Futures, can provide the excitement and market opportunity but in a way that’s “once removed” from potential regulatory surprises.

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