3 Ways to Profit from the Coming Bitcoin Crash


The fact that you could have easily become a millionaire with Bitcoins is now known to almost every child. But it also works the other way around? How could you monetize your belief that the cryptocurrency crash is coming? I took a look around the bitcoin universe for investment opportunities to earn on the decline of the BTC exchange rate. Here are three ideas:

Method no. 1: Betting directly against bitcoin

I recently noticed some Swiss financial service providers that go shopping for the Bitcoin system and offer so-called tracker certificates, with which you only win if the price continues to rise over the coming years. But if Bitcoin is going to be a real currency or even a recognized commodity, then there really should be ways to buy certificates or leveraged products that gain when prices fall.

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To offer that, however, issuers need appropriate tradable products in the futures market with which to hedge customer trades via offsetting positions. After all, no sensible company would want to have an otherwise incalculable risk on its books. After all, the major Chicago derivatives trading platform now offers real-time price discovery.

A bit further ahead is the American fintech platform LedgerX, which actually wanted to start trading bitcoin options back in September. However, only institutions and multimillionaires are allowed to participate there. On a side note, as far as Deutsche Borse (WKN:581005) and Borse Stuttgart/EUWAX are concerned, there is pretty much radio silence on the subject.

That leaves only betting on the Fx and CFD gambling platforms, with small stakes and big leverage. But this is madness to the power of three, because the duration of a trade is often only a few days. There is pretty much a 50:50 chance and in the end, just like in roulette, only the "bank" wins, which earns magnificently on the transaction costs.

So if you want to hedge against a bitcoin crash for whatever reason, you won't get very far this way. But maybe indirect ways can be found. Let's try the next alternative.

Method no. 2: Selling companies with strong bitcoin exposure

Originally Bitcoins were mined with standard hardware. However, these days it takes such an incredible amount of power-hungry computing operations to bring even one more unit to life that with normal computers, you'd probably need numerous additional coal-fired power plants, nonsensically. Only extremely efficient application-specific circuits (ASICs) can still make the fun pay off. In particular, the Chinese company Bitmain builds small computing monsters, which are equipped with elaborately developed ASICs manufactured by contract manufacturers ("foundry") such as TSMC (WKN:909800).

However, this costly way is currently probably only worth it for bitcoin. For less prominent cryptocurrencies, participants prefer to rely on re-purposing graphics chips (GPUs). Investors of NVIDIA (WKN:918422) partly have high hopes for the development of a new strong pillar, which is growing rapidly at the moment. Direct competitor AMD (WKN:863186), as well as Intel (WKN:855681) and Micron (WKN:869020), are also expected to be among the beneficiaries, according to analysts.

Once the bitcoin crash kicks in, I think all other cryptocurrencies will be dragged down with it and be stampeded out in the short to medium term. For some semiconductor manufacturers, this could put pressure on the price, at least in the short term, but whether it would affect them in the long term is questionable.

Moreover, since we can hardly estimate the relevant time, it might be difficult to enter into a profitable transaction in this way. By the way, there are currently also on the rollercoaster Bitcoin Group (WKN:A1TNV9) according to my research exclusively certificates on rising prices (as of 17.10.). But either way, I like this next option better.

Method no. 3: Buying companies that appear threatened by bitcoin

As for Bitcoin's underlying technology, blockchain, players with the function of a central middleman in a wide variety of areas have to worry somewhat because they could potentially be replaced by decentralized mechanisms. But who is actually threatened by Bitcoin itself? Many fans believe that central banks are shaking as well as everyone who somehow makes money from cash circulation. For example, I would think of the manufacturers of point-of-sale systems and ATMs, i.e. z. B. Vectron Systems (WKN:A0KEXC), Diebold (WKN:856244) and NCR Corp. (WKN:919692), perhaps VISA (WKN:A0NC7B) or cash specialist Loomis (WKN:A0RC4M).

So the idea here is that such companies could develop positively as soon as the perceived danger has disappeared, and in the best case scenario, at the same time, the appreciation of cash in general increases again. I wouldn't expect too much from this effect, but if you have a positive opinion of one of the affected companies anyway, it might be worth investing.

It's hard to get rich in a bitcoin crash

If you're convinced cryptocurrencies are just a passing fad, you might like a way to win with this prediction. But unless you have a fanatical friend who's up against it in a private bet for a case of beer, things get complicated.

Since there are no really matching trading tools, one would have to identify companies that are somehow strongly affected by Bitcoin, be it as supplier, service provider or sufferer. My best idea right now is Diebold, but I think it might be worth mining for an even more apt alternative.

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Ralf Anders owns shares of Diebold. The Motley Fool owns and recommends shares of Nvidia and Visa. The Motley Fool recommends Intel and NCR.

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