Key tools for trading in the Web3 era
To trade in Web3, it's essential to know and use certain resources that allow users to operate autonomously within decentralised platforms. These tools facilitate access to a secure, transparent, and decentralised financial ecosystem. Here are the main ones:
Self-custody wallets: A self-custody wallet, like the Bitpanda DeFi Wallet, enables direct management of digital assets (tokens, NFTs, stablecoins) without intermediaries, interacting with dApps, DEXs, and DeFi protocols, offering secure access to the Web3 ecosystem.
Decentralised Exchanges (DEXs): DEXs allow direct transactions between users without a central order book. Through smart contracts and liquidity pools, they reduce intermediation costs and let users maintain complete control over their operations.
Decentralised Autonomous Organisations (DAOs): DAOs enable decentralised platform management, where users make collective decisions without a central authority, contributing to platforms' evolution autonomously and transparently.
Token-based governance: Token-based governance allows users to participate in managing Web3 platforms, earning voting rights based on the tokens held, influencing decisions like technical changes and strategies, eliminating the need for centralised authorities and promoting distributed management.
These tools form an ecosystem that challenges the centralised model, adopting open and modular solutions for a fully autonomous trading experience.
Advantages and risks of Web3 trading
Web3 trading offers multiple advantages, transforming traditional trading into a more dynamic and accessible experience. Among these are:
Earning opportunities: Tools like staking, lending, and liquidity mining allow users to generate active income, creating new revenue opportunities from their capital.
High flexibility: Users can operate quickly and in a personalised manner, adapting to market conditions and their own needs.
Global inclusivity: Without access barriers, Web3 trading democratises financial markets, allowing anyone, anywhere, to participate without restrictions.
These advantages make Web3 trading a unique opportunity for those seeking an alternative and profitable approach to financial markets. Additionally, the system enables direct exchanges between users (Peer-to-Peer) and liquidity pools, promoting faster and more secure transactions in a decentralised context.
However, Web3 trading also presents some challenges and risks to consider. In particular:
Scams: Inexperienced users might fall victim to fraudulent practices by malicious actors.
Impermanent loss: When asset values change unfavourably in liquidity pools, users might incur unrecoverable losses.
Smart contract bugs: Vulnerabilities in contract codes can compromise transaction security.
What types of assets can you trade in Web3?
In Web3 trading, an asset’s value is shaped by its tokenomics – the rules that define how it’s created, distributed and used within its ecosystem. Understanding tokenomics helps users make smarter, more strategic decisions.
Here are the most common types of tradable assets in Web3:
Native tokens (e.g. ETH, SOL, AVAX): Used for paying network fees and as the main currency in blockchain ecosystems.
Governance tokens: Let users vote on platform decisions, from protocol upgrades to funding changes in DAOs.
Stablecoins: Designed to hold a steady value, they help protect against market swings and support safe, reliable transactions.
NFTs (non-fungible tokens): Unique tokens that prove ownership of digital items like art or collectibles, creating new markets and trading opportunities.
Top Web3 trading strategies
Web3 trading strategies vary depending on your goals, risk appetite and experience. In a decentralised environment, where you control every move, there are several tools and approaches to choose from. Knowing how each strategy works and when to use it is key to trading confidently in this volatile ecosystem.
Swapping vs trading
There are two common ways to exchange digital Assets in Web3: swapping and trading. Both aim to help users profit or convert tokens, but they suit different levels of experience.
Swapping: Swapping lets you exchange one crypto for another instantly using decentralised exchanges (DEXs) like Uniswap or PancakeSwap. It’s simple and ideal for beginners or anyone wanting quick conversions without handling complex orders or market analysis. However, keep in mind issues like slippage, the difference between the expected and actual transaction price, especially during low liquidity or high volatility.
With Bitpanda Swap, you can seamlessly swap any supported crypto asset for another within seconds, directly on the Bitpanda platform. It’s ideal for beginners and anyone looking for quick and effortless conversions, without dealing with order books or market timing. Just choose the assets, confirm the swap, and you're done.
Trading: Trading is a more advanced approach. It involves using tools like technical analysis, price charts, market orders and risk management strategies to decide the best time to buy or sell. It allows for higher profit potential, but it’s time-intensive and riskier.
Yield farming and staking
Web3 also lets you earn from your assets passively, particularly through DeFi strategies like yield farming and staking. Both can generate returns but differ in risk and complexity.
Yield farming: This means providing liquidity to DeFi protocols in exchange for rewards, often paid in bonus tokens. You deposit token pairs in liquidity pools that fuel decentralised services and earn a share of the trading fees or incentives. While returns can be high, so can the risks – mainly from impermanent loss, where token values shift unfavourably. Yield farming is best for those who understand DeFi and how protocols work.
Staking: Staking involves locking up tokens (e.g. Ethereum, Cardano or Polkadot) to support a network’s operations, like transaction validation. In return, you receive periodic rewards, like passive interest. Compared to farming, staking is more stable and doesn’t involve pairing tokens or direct exposure to impermanent loss – making it ideal for users who want consistent returns with lower volatility.
