Crypto Futures Explained

What are Futures Contracts?

Futures contracts are an important part of traditional finance: They are highly complex financial instruments used by advanced or technical investors. Investors, companies, and governments use derivatives such as futures contracts to safeguard their exposure to risk and asset price volatility.

A derivative is a type of financial contract that derives its value from an underlying asset. Traditionally, derivatives are used in markets such as commodities, currencies, stocks, or bonds. These contracts can be traded over-the-counter or through exchanges.

What are Cryptocurrency Futures?

In the crypto industry, the futures market is a rapidly growing sector that generates trillions in trading volume every month. Like stock options or commodity futures contracts, crypto futures can guard against volatility and adverse price changes. Crypto futures also act as a tool that investors can use to speculate on future crypto prices or hedge against changes in the price of a cryptocurrency.

Advantages of trading Crypto Futures

Flexibility: Non-crypto holders can speculate on the price of a cryptocurrency to make a profit. You can use USDT to open a crypto futures position, and you can choose to settle your profit in USDT.

Leverage: Gain significant exposure to a specific cryptocurrency with only a fraction of its total cost. With leverage, you can magnify small price movements to create profits that justify your time and effort.

Liquidity: Crypto Futures markets are extremely liquid, with transaction volumes reaching trillions in US dollars. Liquid markets are less risky because traders can enter and exit positions easily with minimal slippage.

Portfolio Diversification: Diversify your trading strategies to generate more profit. Traders are able to develop complex trading strategies, such as short selling, arbitrage, pair trading, and so on.