Large crypto exchanges provide a variety of different tools that allow for making a profit from the high volatility of digital assets. One of the most complex yet profitable is trading crypto futures. This method allows making a fortune even with a minimum initial investment portfolio and generating income even on a downward market trend. Let’s take a closer look at crypto futures trading in this article.
Understanding Crypto Futures
The essence of futures is speculation on the future asset’s value. Futures contracts are a pretty old mechanism for making a profit in the traditional markets. It works with such commodities as gas, oil, gold, silver, etc. With the development of the crypto market, futures started to be applied to this market as well. The point is to forecast the future coin’s price correctly, and for that purpose, a thorough analysis and research are needed. That is why crypto futures appear to be a rather complicated method for beginner traders.
How Does It Work?
Let’s imagine you carried out a thorough analysis, and a coin’s price must increase by your estimate. You go to one of the largest crypto exchanges, register on them, and make a contract mentioning the exact value of the asset you expect and the date when you owe to execute the agreement on selling it at that price. When that day comes, you check the asset’s value, and if your forecast is correct, you sell your coins and make a profit from the price increase.
The reverse citation is when you believe the coin’s rate will drop. You sell your holdings and make a contract on buying them on a certain date and at a specific price. When the day comes, and if your prediction is right, you buy back the assets at a significantly lower rate. In this case, you still have the same number of crypto assets, but by selling and repurchasing them, you make a profit from the price difference.
Here are some platforms where you can trade futures:
- Binance Futures.
The WhiteBIT crypto futures platform is the most convenient among them. The service allows for demo practicing trading crypto futures that will help you understand this method better.
Futures trading prices– Buyers and sellers determine cryptocurrency prices through an economic process of supply and demand. The spot price is the price at which all transactions in the spot market are settled. In contrast, the futures price is calculated by adding the current spot price to the futures premium.
Crypto futures resemble standard futures contracts for commodities or stocks because they allow you to bet on the price trajectory of an underlying asset. Cryptocurrency futures trade on the Chicago Mercantile Exchange and cryptocurrency exchanges.
First off, it can be used as an additional tool that can help hedge your portfolio while you continue making the best out of your regular trading strategies. Secondly, futures trading in the crypto space enables you to benefit from any market state.