Futures Trading In Cryptocurrency: What Does It Mean And How Does It Function?

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Last Updated December 15th 2022
4 Min Read

All of the tools you'll need to tackle futures trading head-on are right here. There are situations when it may provide more favorable prospects than spot trading or options trading. Having the ability to open long and short bets across numerous cryptocurrencies.

Futures trading is a way to bet on the future value of an asset, such as a cryptocurrency, without actually holding any of those assets. Cryptocurrency futures allow investors to speculate on the future value of a digital currency, much as assets or futures contracts. Bitcoin futures represent the most widely traded cryptocurrency derivative.

Explain The Process Of Futures Trading

Observing futures trading for cryptocurrencies on a site such as Bitsoft 360 cryptocurrency exchange would not distinguish it from standard trading. That's because, in any situation, traders will establish short- and long-term contracts and apply sound risk control practices.

Futures contracts, in contrast to trading securities, are not focused on the actual financial funds themselves but rather on the market movements of those commodities. Futures are far more malleable and manageable without tangible commodities. In addition, they facilitate high-profit dealing.

Comparison Of Commodities Markets And Cryptocurrency Futures

Cryptocurrency futures are quite identical to other commodity futures used in the corporate sector. It's not surprising since Cryptocurrency is classified as an asset by the CFTC in the United States.

Commonalities

Futures contracts on either cryptos or commodity markets do not include the physical assets themselves, but only their prices. Typically, the values of derivatives as well as underlying assets are quite close to one another. Futures on both exchanges have common features, such as expiration and payment dates.

Distinctions

Unlike commodities futures, which have a predetermined expiration and payment date, certain crypto futures, like permanent agreements, do not. Additionally, because of the far higher volatility of crypto assets, crypto futures tend to be more unpredictable than commodities futures.

Commodity futures are also distinct since many of their trades are conducted for very utilitarian purposes instead of for pure speculation.

The Advantages of Trading Futures

With excellent purpose, cryptocurrency futures have gained a lot of traction. There are several reasons why cryptocurrency futures might be a good investment:

Easy

Futures trading is more accessible to novice traders since it does not need exposure to a competitive economy or a protected online wallet, two prerequisites for investing in real cryptos. In reality, this is the main factor driving the approximately two to three times higher market cap in cryptocurrency futures than in trading securities.

Better Opportunities For Gain

Leveraged cryptocurrency futures trading often results in larger profits. You may trade on Bitsoft 360 with a leverage of up to 100x, which means you can invest in a $1,000 asset with only $10. Although the potential rewards might be greater, you must also be aware that the potential losses can be far greater when utilizing leverage.

Adaptable Methods of Trade

When compared to trading real cryptos, cryptocurrency futures are far more amenable to the adoption of trading methods, particularly during intraday trading. Additionally, there are no stoppers for shorting while using cryptocurrency futures. As a result, you have greater leeway to experiment with various trading techniques to get optimal results.

Borrowing Costs = 0%

Futures differ significantly from Perpetuum futures in many key respects, including the absence of a funding rate as well as the presence of future values greater than spot rates. This sets up a situation ripe for cash-and-carry trading, a buyer technique that mixes a strong bet in the spot industry with a short one in the futures industry.

The Closing Remark

Futures markets for cryptocurrencies are favored by institutional and individual traders alike because of their decreased friction and security risks compared to the spot market. When comparing the two types of cryptocurrency derivatives, cryptocurrency futures continue to dominate cryptocurrency choices. Buyers of call options and sellers of put options enter into options contracts to secure the ability, however not the duty, to acquire the asset class at a specific cost and period.

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