More and more people are turning to cryptocurrency trading as a way to achieve financial success. Essentially, it involves you buying cryptocurrencies and then selling them to profit from changes in their market value. A particular feature of trading is the availability of crypto futures deals. In the crypto market paradigm, futures allow people to make predictions about future changes in value.
What are Bitcoin futures? Suppose you have faith that the value of Bitcoin will increase in the next three months, even though it currently sits at $25,000. To act on this assumption, you opt for a BTC futures deal with a duration ending September 1 and a price of $30,000.
If BTC rises to $34,000 by September 1, you will earn income from your contract. You have the option to either sell the contract before it expires or liquidate it by buying BTC at the preset price of $30,000 and selling it at the current price of $34,000. Your profit will be the gap between the value of BTC in the deal and the market rate.
Alternatively, if the BTC rate falls to $21,000 by September 1, the settlement of the contract would result in a loss. You can either sell the deal at a lower rate before it is up or liquidate it by buying Bitcoin for $30,000 and then selling it for the lower market price of $21,000. The amount of your loss would be calculated as the difference between the price specified in the agreement and the going rate. Let’s discuss the opportunities associated with trading cryptocurrency futures.
What advantages do I get when buying a futures contract?
Here are some advantages:
- Control over risks. The future can help traders protect against potential losses by going long or short in asset prices. Allows hedging of positions to deal effectively with volatility.
- Price discovery. Futures allow you to predict the rate of assets in a particular time frame. This is done through futures trading, which helps to determine the correct price of cryptocurrencies and contributes to the transparency and accuracy of the market.
- leveraged. Futures often provide leverage, which allows people to manage a larger position while investing a smaller amount.
- Greater liquidity. The use of futures could improve market liquidity through the use of agreements with established expiration dates and settlement terms. This approach appeals to a wide range of market participants.
- Diversification. Futures on various cryptocurrencies allow diversifying portfolios. This way, people can spread their risk across multiple assets and possibly gain from changing market trends.
- Access to new markets. Traders can access crypto that may not be available on regular spot exchanges. This allows them to be exposed to various digital assets without the need to buy cryptocurrency or store it.
- Arbitration opportunities. By taking advantage of the differences in prices between futures and spot prices, people can make a profit by buying at a lower rate on one cryptocurrency exchange and selling at a higher price on another.
Please note that participating in trading carries risk, which could result in significant financial damage. Traders should assess their risk tolerance and conduct research before participating in futures programs. Look only for recurring platforms if you want to trade crypto futures.