What is futures trading in crypto? Crypto futures give investors the opportunity to bet on the future price of crypto without having to actually own or handle it. We provide more detail about future training in this article.
What is futures trading in crypto?
Futures trading is a method of speculating on the value of assets, including cryptocurrencies, without actually owning them. Similar to commodity futures and stock futures, cryptocurrency futures allow traders to bet on the future price of digital currencies. Bitcoin futures are currently the most popular crypto futures contract.
How does crypto futures trading work?
There are three main components to a crypto futures contract.
Expiration date: This refers to the date when the futures contract must be settled. In other words, one party has to buy, and the other has to sell at the pre-agreed price. It's worth noting, however, that traders can sell their contracts to other investors before the settlement date if they wish.
Units per contract: This defines how much each contract is worth of the underlying asset and varies from platform to platform. For example, one CME bitcoin futures contract equals 5 bitcoins (denomated in US dollars). One bitcoin futures contract on Deribit, however, equals 10 US dollars worth of bitcoin.
Leverage: To increase the potential gains a trader can make on their futures bet, exchanges allow users to borrow capital to increase their trading size. Again, leverage rates vary greatly between platforms. Kraken allows users to supercharge their trades by up to 50x, whereas FTX reduced its leverage rates from 100x to 20x.
There are also two different ways futures contracts can be settled.
Physically delivered: Meaning upon settlement, the buyer purchases and receives bitcoin.
Cash-settled: Meaning upon settlement, there's a transfer of cash (usually US dollars) between the buyer and seller.
Conclusion
Future contracts involve risk like any other type of trading. Risk can be reduced by researching the market, using additional tools such as indicators and technical analysis, and setting targets and risks for each trade.
What Is Futures Trading In Crypto? How Crypto Futures Trading Works? I hope this article can help you some way.
