Cryptocurrency futures are an interesting investing strategy, giving investors the opportunity to bet on the future price of a given digital asset. Futures are a derivative product, typically used by institutional investors.
Depending on fluctuations of the price, investors could gain profit or lose. The whole strategy is based on the expectations of price changes.
As any other crypto trading or investment strategy, this could bring both extreme success and losses. Before you start building your own strategy on crypto futures, you must understand how they work and what is the risk you’re taking.
Crypto futures trading
An intriguing aspect of trading crypto futures is that you actually do not need to own coins, when you buy them. The aim of traders is to acquire or sell contracts, reflecting the future value of the cryptocurrency.
Investors are allowed to bet on the future price of the chosen cryptocurrency.
One of the main advantages of this type of trading is that traders do not have to lock their capital. Anyway, they need to be careful, as it is still possible to end up losing money you don’t even own.
If you are new to trading, you may try some demo platforms, allowing you to play around with virtual funds and learn how you can trade crypto futures. As we know, financial knowledge is crucial for investing money.
Moreover, for investing in crypto futures, you don’t need a crypto wallet, as they are based on cash.
Benefits of crypto futures for traders
Well, crypto futures investments can be a great opportunity for portfolio growth. Actually, this type of trading may even double its value in a single transaction. And yet, you shouldn’t underestimate the risk you’re taking.
White spot transactions bring profit to the investors, when prices are growing, investing in crypto futures can bring money when the quotes fall. That type of investment strategy gives much more opportunity for flexibility and freedom.
Of course, when we talk about crypto investment, we can not miss Bitcoin. Actually, Bitcoin futures provide a great deal of goals for parties in the BTC ecosystem.
Bitcoin futures are a great way for investors to protect their positions. When traders bet on BTC prices, the rise in the spot market may decide to short its futures.
Furthermore, they are able to profit, no matter if the price goes up or down.
Bitcoin futures operate in a fully regulated market, under the Commodity Futures Trading Commission in the US. And while some traders consider Bitcoin risky, we believe that Bitcoin futures may attract a new group of traders.
A strategy example
First thing to know, when investing in Bitcoin futures, is that you have to consider the contract's maturity.
Let’s say that the current price of Bitcoin is $10 000. If you buy 10 000 futures contracts at $1 on Bitcoin, you indirectly invest in 1 BTC.
After that, you can bet on Bitcoin’s price going up or down. Both ways, the exchange platform will pair you with someone betting the opposite way.
So, when the contracts reach maturity, one of the traders will have to pay up.
Although it seems simple, crypto futures trading is as risky as any other cryptocurrency investment. It requires knowledge and understanding of the market and can bring both great profits and extreme losses.
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