How Does Cryptocurrency Futures Market Work?

Futures trading is a common financial tool used around the world for making a profit from speculation on goods and commodities value. The commodities used in this type of trading are grains, oil, and others. Crypto assets also take part in futures derivatives. However, since the crypto market is so unstable, and it is much more difficult to predict crypto prices, crypto futures appear to be a much more complex and risky tool. Let’s take a closer look at the crypto futures market and see how it works.

The Idea of Futures Market Crypto

This financial tool resembles speculation on asset values. Suppose you made a research on the market and came to the conclusion that the BTC rate is going to drop in the future. So you enter into an agreement where you indicate the value you think BTC will reach and the day when you owe to fulfill the commitments by a contract – to purchase BTC at a price fixed in the contract. So if you have some BTC now, you sell them out and wait until the contract expires. If your price forecast is correct, you re-purchase BTC at a reduced value. In such a way, you still have BTC in your wallet plus you make a profit from its price difference.

Another situation – you estimate that BTC will rise. You enter into a contract where you fix a higher value for BTC and the day when you will sell your coins. If your prediction is correct and the BTC value really increases, you sell your coins and make money from the price growth.

Why do we mention Bitcoin in our example? Everything is simple – the fact is that the best crypto futures are made with Bitcoin. BTC is the most reliable and stable digital asset with the lowest volatility and the most enormous liquidity. So there is always demand for BTC. It is not recommended to pick highly volatile crypto assets for futures trading. So choose among the top-traded crypto list.

For more information about futures trading, check out the WhiteBIT blog.

Leave a Comment