More and more people are turning to crypto trading as a way to achieve financial success. Essentially, it involves that you purchase cryptocurrency and then sell it to make a profit from changes in its market value. A particular feature of trading is the availability of crypto futures agreements. In the paradigm of the crypto market, futures enables individuals to make predictions on further value changes.
What are Bitcoin futures? Suppose you have faith that Bitcoin’s value will surge over the next three months, even though it currently stands at $25,000. To act on this assumption, you opt for a BTC futures agreement with a duration ending on September 1st and a price of $30,000.
If BTC goes up to $34,000 by September 1st, you will get income from your contract. You have the option to either sell the contract before it expires or settle it by purchasing BTC at the pre-arranged price of $30,000 and selling it at the current price of $34,000. Your profit will be the gap between the BTC value in the agreement and the market rate.
Alternatively, if the rate of BTC drops to $21,000 by September 1st, settling the contract would result in a loss. You could sell the agreement at a lower rate before it ends or settle it by purchasing 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 current rate. Let’s discuss opportunities associated with cryptocurrency futures trading.
What Advantages Do I Get When Buying Futures Contract?
Here are some advantages:
- Control over risks. Future can help traders protect against potential losses by taking long or short positions on the price of assets. It allows for hedging of positions to effectively deal with volatility.
- Price discovery. Futures allow predicting the rate of assets in a particular timeframe. This is done by trading futures, which helps to determine the correct pricing for cryptos and contributes to market transparency and accuracy.
- Leveraged. Futures often provide leverage, enabling individuals to handle a bigger position while investing a smaller amount.
- Increased liquidity. Using futures could improve the liquidity of the market by using agreements with set expiration dates and settlement terms. This approach appeals to a broad range of market participants.
- Diversification. Futures on various cryptos enables one to diversify portfolios. In this way, individuals can distribute their risk among multiple assets and possibly earn on changing market trends.
- Access to new markets. Traders can access cryptos that may not be available on regular spot exchanges. This enables them to be exposed to various digital assets without needing to purchase cryptocurrency or store it.
- Arbitrage opportunities. By taking advantage of the differences in prices between futures and spot prices, individuals can make profits by purchasing at a lower rate on one cryptocurrency exchange and selling at a higher price on another one.
Please be aware that engaging in trading carries risks, which could lead to significant financial harm. Traders should evaluate their risk tolerance and conduct research before participating in futures programs. Look for only recure platforms if you want to trade crypto futures.