Cryptocurrency futures are a contract between two parties who place a bet on how the value of digital money will change. With such documents, investors can access promising online assets without buying them. Crypto futures have a lot in common with standard futures contracts for securities or commodities, as they can be bet on a change in the price vector. Cybercash futures are presented on the Chicago Mercantile Exchange and particular platforms such as WhiteBIT. Let’s talk about how commercial transactions with crypto derivatives take place and what are their advantages and risks.
The definition of crypto futures trading
Trading futures for digital money is a commercial transaction replicating the interaction with futures in the primary markets. Such trading involves using futures contracts, that is, legal agreements about buying or selling an asset at a specified price.
In cryptography, the client undertakes to buy the specified cryptocurrency at the selected price in a certain period, regardless of what its price will be on that day.
The duration of the contract can vary from days to several years. Many investors treat such manipulations as a game of chance, as participants in the transaction try to predict, based on analysis, how the value of assets will behave in the future. Regardless of the circumstances, the transaction is executed at the specified time, and usually, it only benefits one party.
Pros and cons of futures dealing
The main benefit of digital coin futures trading is that they create regulated exposure to virtual money. It is a critical condition for unstable ecosystems with sharp price changes. Consider other advantages of such derivatives:
- Price transparency: futures contracts are calculated daily based on the reference cost that is displayed in all cybercash-related arrangements. A single reference cost reduces the volatility of spot prices and makes the crypto payable.
- Leveraged trading: with leverage, the user can trade digital banknotes paying only a fraction of the cost. It makes trading in crypto futures attractive to entrepreneurs as they do not have to pay the total fee of an asset to profit from price changes.
- Short selling: digital derivatives is a solution for short selling, in other words, betting on a fall in worth without owning an asset. It creates good prospects for crypto skeptics, that is, for people who do not have bitcoins but are confident that the value of cyber money will decrease.
Although there are many advantages of futures trading compared to spot operations, there are several significant risks for investors. For example, leverage allows you to receive a much higher income than your savings. But if you use too much leverage and the contract fails, you risk losing most or all of your capital.
What’s important to know before dealing with crypto futures?
Futures trading is a complex task for any investor. It takes a lot of time to comprehend how the market changes and what external factors are crucial. With so much data to analyze and limited knowledge, it’s no surprise that many newcomers to the cybercash area struggle to get their bearings but lose their savings. It is necessary to approach each transaction strategically to avoid such troubles:
Set aside a certain amount: the main recommendation is to not invest more than you are willing to lose. Never borrow to trade, except for technical borrowing, which is popular in margin trading.
- Make time: interacting with crypto futures is a job, not a hobby, if you want to earn income. Take the time to learn the ins and outs of derivatives trading and determine the correct entry points and rules for tracking open positions.
- Choose the best platform for concluding contracts: reputation is critical in determining a crypto exchange. If you are a beginner, start trading on a reputable platform like WhiteBIT, and always start small.
Cryptocurrency futures dealing is not suitable for all investors. These are volatile derivatives that request comprehending the characteristics of the underlying assets and the situation in the global economy. The risks increase if you add crypto coins, which are themselves volatile resources even before employing leverage.
Interactions with crypto derivatives request a certain mindset to make a profit. You will need complete risk tolerance, a system to implement a trading scheme, and plenty of coffee to work 24 hours a day. Ensure you know the specifics of crypto futures before you buy them.