Crypto futures are an off-shoot of digital assets with exciting interests across many actors. And virtually, every digital asset out there has limitless opportunities building on both adoption and speculation.
The appeal of Crypto futures spans wings across the board, covering nerdy individuals to corporations. Typically, digital assets are growing and ever-increasing in sophistication and regulations. Most interestingly are the morphing of crypto-assets and maturation of the main characteristics of ordinary fiat money.
Explaining Crypto Futures
A Crypto future is a derivative product, and it exists in the form of a contract.
In finer details, a futures contract comprises commitments from parties (at least 2) to allow for either purchase or sale at both predetermined prices and dates.
So within the broader array of futures, crypto futures track those within the digital assets and tokens’ sub-array.
Explanations, in other words, qualify futures contracts to essentially bet. And enable holders to wager pegging on the price of an asset at future dates.
Depending on price action, betting parties can go long for price rises and go short for price falls.
Image Credit: https:coingecko.com
So traders on long futures contracts purchase it at a price upon expiry of the set period. The reverse also applies to traders with short contracts.
Crypto futures contracts close upon expiry.
Futures markets vary in terms of policies that apply to parties. Specifically, some offer to leverage. And leveraging opens up for platforms to allow buyers or sellers to stake on magnified positions through borrowing capital to hold the contracts.
In simple terms, leverage grants staking parties the exposure to large positions and the need to fund the same upfront.
Traders on leverage don’t require matching the entire value of a contract. As a leeway, they go leveraging, allowing them to secure a contract with a very minute amount of equity in stake – best known as an initial margin.
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Logically, positions running in opposite directions require traders to have the ability to hold the open position by providing maintenance margins.
Platforms allowing for leverage also counter misuse of it by providing levels of thresholds. Any breaches in line with the thresholds end up in liquidations of the open positions.
Anyways, leverage is a double-edged sword, and smart speculators play around with it to their advantage.
Crypto Futures – the Trading Basics
Here is a real-world scenario to help us see how crypto futures work. Assume the price of a futures contract is USDt 1,000 for a crypto asset. A speculator is convinced of a price surge and commits to buying 5 units or futures contracts. Overall, the trader upfront requires to raise USDt 5,000 to open the positions.
After the expiry of time, the price moves, and each futures contract is worth USDt 2,000. At that instance, the trader sells off the contract, hitting a turnover of USDt 10,000. They comfortably pocket the difference as profit -USDt 5,000.
The above scenario works for shorting futures contracts. In the place of buying, the trader will have to sell the 5 futures contracts at a total price of USDt 5,000 ( USDt 1,000 each). Assume price falls to USDt 500 per futures contract: the trader can repurchase the 5 contracts at USDt 2500 – and pocket the difference as a profit.
Advantages of crypto futures trading over spot trading
Bitcoin and Crypto futures enable traders to speculate on the underlying Crypto-asset prices without the prerequisite of buying or selling them. Opening long or short crypto futures contracts differs from conventional spot trading by not needing to hold or own the underlying crypto assets themselves.
Towards the last quarter of the year 2017, Bitcoin futures hit the market, and many credible digital assets followed suit. Ideally, Crypto-futures made a landmark achievement within the entire domain of crypto-assets. Along with the other digital products, here are the pillar advantages of crypto futures Contracts:
· Ease of Access: Trading Crypto futures is as easy to access as to that of other digital assets. Whether an expert or newbie, you can access many trading platforms that offer you varied terms across the board. Typically also most platforms offer reasonably manageable minimum investment caps for entry requirements.
· Trading on Both Sides in a Market: Crypto futures are beneficial for trading flexibility. Trading either long or short futures contracts is at the discretion of the trader. There’s no restriction, and this particularly helps the cohorts of traders who day –trade. Volatility works both ways, and thus there exists an open leeway to swing in any direction of preference.
· Marketplace Regulations: Unlike trading conventionally on most digital assets, authorities carry out oversight in structured models with crypto futures. It serves to bring order and fairness, which helps shed off the fraud and noise with unregulated crypto-assets exchanges. Typically, regulation keeps the bad actors off money launderers, outright fraudsters and crime-terror funder, drug traffickers, among others
Challenges Spot Trading on Bitcoin and Other Crypto Futures
Looking at the opposite side, here are the contrasts that plague traders who want to spot-trade or hold it for trading
More Uphill Setups Required: If you want to trade Bitcoin or other crypto assets on spot prices, first, you require a digital wallet. Online platforms like Kraken and Coinbase help with that. In actual terms, this is not a downhill task, especially if you are both not tech-savvy and unfamiliar with the entire crypto- landscapes.
Security of Assets: There are wagering concerns, especially regarding web-based exchanges. Starting with the potential of technical errors, anything could happen. This is where great establishment and regulations play a critical role in warding off bad actors who pounce at an unknown moment.
Taxation Uncertainties: Many jurisdictions apply varying rules, and spot trading is subject to uncertainties. Varied viewpoints also apply across traders, whether to declare or not incomes or losses from crypto trading activities.
Trade Bitcoin and Crypto Futures Contracts on BTCC
BTCC is your longest-lasting and very secure platform to take on Crypto futures and the daily trading volume exceeds 1,200,000,000 USDT, especially in the South Korea’s Market / 비트코인 선물거래. As long as you have internet connectivity, go ahead and take on the opportunities.
BTCC covers you with accessibility, either on desktop or mobile clients.
Either of the clients helps you with a host of handy indicators to help you read the charts and place your bets.
BTCC is for you, the international Citizen, and the platform bolstered with USDt as the base currency. USDt is a Stablecoin, and you can always gauge your worth by pegging it to the respective base currency – the US dollar.
Crypto futures are an amazing opportunity. If you approach them from the point of deciphering volatility and reactions to them, your chances of getting it right are relatively high.
Go for a free account on BTCC and try your first Bitcoin futures trading. New user will receive up to 2,000 USDT deposit bonus!