1 k
views

A Guide to Popular Strategic Investments on Crypto Futures

Futures are a prominent sort of cryptocurrency derivative that institutional investors typically use. Experts can use crypto futures’ data to forecast price changes and market sentiment in the future.

Depending on future price fluctuations, traders may profit or lose. For example, if Bitcoin trades at $45,000, an investor might trade futures contracts in anticipation of a price change.

To build a successful strategy on crypto futures, you need to understand what they are and how they work. The purpose of this article is to introduce you to the world of crypto futures.

The information in the following sections is not financial advisory. You should always perform your research on the matter.

Trading crypto futures

In many aspects, crypto futures trading differs from spot trading. The central notion you need to keep in mind is that you do not own coins when you buy a crypto future.

This notion may sound counterintuitive but think of it simplistically. Traders seek to acquire or sell derivatives contracts reflecting the value of crypto in the future.

Futures trading, in essence, allows investors to bet on a cryptocurrency’s future worth. Traders can go long to bet on a price rise in the future or short in the opposite case.

As you may have heard, financial leverage is one of the most famous advantages of futures trading. Because traders do not have to lock up whole quantities of capital, leverage allows for higher capital efficiency.

However, you should be very cautious when using leverage in your portfolio. In some cases, traders may end up losing money they do not own.

For individuals new to futures trading, a leverage of 2x or 5x can be a good starting point. Even better, some trading platforms allow you to open a demo account to play around with virtual funds.

The advantage of using a demo account is that you can learn how to trade crypto futures directly on the market. Remember: while financial knowledge is fundamental to investing money, experience is the best teacher.

Typically, traders employ crypto derivatives as a defensive hedge for their portfolios. But how does this approach work? Let us imagine two cases:

  • Hedging a long position: you may include a futures contract in your portfolio if your coins prices fall. If you short the futures contract, you may cover your loss.
  • Hedging a short position: the opposite mechanism can work if you are betting on a crypto price collapse. Buying a futures contract at a higher price should hedge the risk of a bull market.

Furthermore, because the futures are cash-settled, there is no need for a crypto wallet. In this transaction, there is no actual exchange of cryptocurrencies.

Keeping cryptocurrencies in custody may be costly and contribute to the overall financial expenditures of your family. Finally, do not forget that futures contracts have position and price restrictions. The mechanism allows investors to limit their risk exposure to a specific asset class.

Why do traders use crypto futures?

Investing in crypto futures opens up more possibilities for portfolio growth. Simply said, the leverage in futures trading may quickly double a portfolio’s value in a single transaction. Once again, keep in mind that using leverage is a highly risky operation.

Hedging, as previously indicated, is another motivation to invest in futures contracts. Protecting a portfolio, especially with cryptocurrency, may be difficult, even for a professional.

When assets move in the wrong way, hedging an investment is a solid defense line for any portfolio.

Spot transactions on the crypto market benefit the investor when the price rises. Futures traders, instead, may earn money by shorting the market when the quotes fall.

This strategy grants investors greater flexibility and freedom to speculate. Considering futures’ complexity, you need high financial knowledge and experience to trade them.   

Discovering Bitcoin futures

Bitcoin futures provide a variety of goals for various parties in the BTC ecosystem. Futures are a way for miners to lock in prices that guarantee a return on their mining investments.

Bitcoin futures can help investors protect their positions in the spot market. For example, traders betting on BTC prices rising in the spot market may decide to short its futures.

Consequently, they stand to profit even if the BTC price swings in the opposite direction of their spot wager. Bitcoin futures can also benefit speculators who often enter and exit futures bets for short-term profit.

Unlike the actual crypto, Bitcoin futures operate under the Commodity Futures Trading Commission (CFTC) regulation in the United States. If you feel safer trading in a fully regulated market, Bitcoin futures may catch your interest.

Bitcoin has traded outside the confines of regulation for most of its brief history. Some investors may consider BTC too risky, so futures may attract this new group of traders.

Bitcoin futures – a simple example of a strategy

When trading Bitcoin futures, the first thing a trader must consider is the contract’s maturity. Crypto derivatives exchanges often provide weekly, bi-weekly, quarterly, and other choices.

For example, imagine you buy 45,000 futures contracts at $1 on Bitcoin. Supposing that the BTC price is $45,000, you indirectly invest in 1 BTC.

You can gamble on Bitcoin’s price growing (going long) or declining (going short). In any situation, the exchange platform will pair the trader with someone betting in the opposite way.

When the contract reaches maturity, one trader will have to pay up. As you may guess, the trader who lost the bet will be the one to pay.

Final thoughts

For many people, futures trading is a difficult task. Understanding how the market changes and adjusts over time takes time, and it could not be otherwise.

Bitcoin live price
Btc
Bitcoin
$29.548
price
0.76245%
price change
BUY NOW

Many new traders struggle to establish their bearings and finally crash. For this reason, it is critical to approach each transaction with a strategic mindset.

Stay up to date with our latest articles

More posts

Volt Inu (VOLT) – Providing Passive Rewards for an Entire Army of Users

Volt Inu (VOLT) is a hyper-deflationary token seeking to help users diversify their investments across several asset types. Its goal is to build a loyal community, the VOLTARMY, whose members will have access to a growing ecosystem of assets and products, including NFTs, reflections, merchandise, and a P2E game. The meme-coin trend produced several projects with varying degrees of success and popularity in recent years. For instance, some coins like Shiba Inu made it into the top-10 cryptos by market…

Shrimpy Launches Advisory Desk for Investing in Crypto Assets

Shrimpy – a cryptocurrency market portal and portfolio manager – has announced the upcoming launch of its crypto industry advisory desk. This month, Shrimpy was recognized by the Securities and Exchange Commission (SEC) as a registered investment advisor. With this, the company has launched an actively managed portfolio service. The team will invest in cryptocurrencies on its customer’s behalf, promising “low volatility” and “no rug pulls”. This service will be handled by humans, as opposed to Shrimpy’s automated investment options.…

Central African Republic Prepares to Set Up Bitcoin Investment Hub

Detractors call it an ill-judged scheme.   The Central African Republic (RCA) government prepares to usher in a Bitcoin investment hub. This is coming right on the heels of its bold move of accepting BTC as a legal tender last month. This step appears to be its latest attempt to provide a structure for Bitcoin adoption.  The new initiative, termed “Sango”, will help usher CAR into a “digital future of endless possibilities”, according to the government’s published document. Although “Sango”…

Milady’s Charlotte Fang Steps Down After Bigoted Past Resurfaces

Co-founder of the Milady Maker NFT collection Charlotte Fang no longer holds their position as CEO. After Twitter users kicked up an uproar concerning their ties to certain racist and homophobic blog posts and possibly a suicide cult, Fang quit the project. 0xngmi's Allegations DefiLlama analyst 0xngmi made the allegations in a thread showing tweets from Miya's old account. Miya compares black people to gorillas in these posts and says "strong male figures" are necessary to tame women. The poster…

HyperEarn Officially Opens Its Token IDO

HyperEarn is a new initiative with a defined goal and mission. The team aims to incite a love of sports among its users and help them interact with one another.  In order to fulfill its mission, HyperEarn intends to use blockchain technology. The HYPERN token IDO has just opened on the market.  Key Facts about HyperEarn IDO By participating in the HYPERN IDO, a user can be among the first to use this new token.  This doxxed team promised several…

Korean Police Ask Exchanges to Freeze Luna Foundation Assets

Police Demand that Korea's Big Five Exchanges Cooperate.   Seoul Metropolitan Police Agency has issued a request to five crypto exchange companies to freeze Terra’s Luna Foundation Guard’s assets. They reportedly took action following their discovery of suspicious pointers to embezzlement in the foundation’s funds. Terra USD (UST), an algorithmic stablecoin, depegged from its $1 peg, crashing to less than 10 cents earlier this month. Its sister coin LUNA also plummeted to almost zero, eliciting a backlash among its holders…

GameStop Unveils New Wallet in Plans for NFT Marketplace

Longtime electronic game giant, GameStop, has announced the release of its beta NFT wallet. The unveiled wallet is the first step to GameStop's goal of a native Ethereum-based NFT marketplace. GameStop Wades in Web3 Waters On Monday, 23rd May, GameStop took to its official Twitter account to publicize the development. The new wallet, downloadable on GameStop’s website, would allow users to send and receive digital assets without leaving their web browsers.  https://twitter.com/GameStop/status/1528693604364976129?s=20&t=xkghM9-X6-nnLMg4U5cgQQ According to the announcement, GameStop’s wallet boasts Ethereum…

HyperEarn – Encouraging an Active Lifestyle through Blockchain Technology

You'll be able to enter the latest trendy movement, "Move2Earn," using the HyperEarn token. There are many ways to get money with HyperEarn. You may run or sleep or even watch advertising to collect rewards.  With this quick introduction on our minds, let's get right into the core of today's review. We will treat HyperEarn neutrally in the article, and we urge you to do your own research before investing. A Closer Look into HyperEarn’s Ecosystem The HyperEarn platform relies…

Do Kwon Drops LUNA Burn Address, But Warns Against Burning

Says It Is For Information Purposes Only. Terraform’s founder, Do Kwon shared a burn address for Luna Tokens on May 21st contrary to his former plan. Two days later, he has added warnings that people who decide to use the address have nothing to gain, in his own opinion. After the crash of the Terra ecosystem, Do Kwon had made several failed efforts to revive the continuous downward spiral. The most recent of those is the hard fork he proposed.…

African Blockchain Startups See Massive Influx of Venture Funding

Africa could become a powerhouse in the blockchain space in the near future, according to research.   Swiss investment company Crypto Valley Venture Capital has highlighted the rise in the volume of funding that has entered Africa’s blockchain space in recent times. In a recent release, the firm noted a substantial increase in this year’s Q1 funding compared to 2021’s. Venture Funding Grows 11 Times in Q1 2022 The Swiss company CV VC recently released its publication, The African Blockchain…