Cryptocurrency futures trading is a way of speculating on cryptocurrency price movements without having to own the underlying cryptocurrency.
In the traditional financial markets, this type of trading has been around for years and is commonly referred to as derivatives trading.
Derivatives are financial contracts that derive their value from an underlying asset (currency, stocks, commodities, etc) and they are generally used as tools to hedge risk, or as speculative vehicles (the latter being the focus of this article). This type of market activity is not available in all countries due to regulatory restrictions.
We’ll be focusing on futures trading in this blog post, but you can also bet on the price movements of cryptocurrencies with options and swaps (for more information on those see: What are Cryptocurrency Options? How to Trade Cryptocurrency on an Exchange).
Cryptocurrency futures are a popular investment method for many traders across the globe because of the wide variety of benefits they offer.
What are Cryptocurrency Futures?
A cryptocurrency future is a derivative instrument that allows investors to speculate on the price movement of a particular cryptocurrency without actually owning it. This allows individuals to take advantage of both long and short positions and earn profits from even falling prices.
How to trade cryptocurrency on an exchange?
Cryptocurrency futures trading has risen dramatically over the last couple of years, with more than $5 billion in BTC futures traded in Q1 2018 alone. There are many factors that have contributed to this increase in popularity, but the most important ones include:
– The ability to profit from both rising and falling prices;
– The ease of access to large amounts of capital;
– Low barriers for entry for small traders.
Cryptocurrency Futures are financial contracts that allow you to buy or sell cryptocurrencies at a pre-determined price and date in the future. They are traded on exchanges and act like any other traded product. They can be used for hedging against an adverse move in the price of the underlying asset, for speculation, or for arbitrage.
The futures market has been around for over 100 years and is popular amongst traders as it allows one to make money from both rising and falling markets by buying or selling futures respectively. The futures market is regulated and is used by many institutional investors.
In this blog, we are going to talk about cryptocurrency futures specifically, as they have become increasingly popular since they were first offered in 2017 by two of the world’s largest cryptocurrency exchanges: BitMEX and OKEx. At the moment, these are the only two cryptocurrency exchanges offering this type of derivative product.
Cryptocurrency futures are a new type of financial contract that enables traders to speculate on the price movement of digital assets. The most straightforward futures contracts are exchange-traded and they’re available on the Chicago Mercantile Exchange (CME) and Chicago Board Options Exchange (CBOE). These contracts allow professional traders to place bets on the future price of bitcoin.
How Do Futures Work?
Futures are a type of derivative instrument, which means that their value is derived from another asset or index. In this case, futures prices are derived from bitcoin spot prices. The most basic futures contract is known as a “vanilla” contract, meaning that it has a fixed price, quantity, expiration date, and delivery date. Futures allow speculators to bet on whether the price of bitcoin will rise or fall; there are no restrictions on shorting a contract. The price of the futures contract is set according to the underlying spot price of bitcoin at the time it expires.
In addition to vanilla contracts, some exchanges also offer more exotic types of derivatives (e.g., options). For example, Cboe offers options on its bitcoin futures products in addition to vanilla contracts. However, these options aren’t currently offered
If you’ve heard of Bitcoin, then you’ve probably heard of Bitcoin futures. And if you still haven’t, then you’re in the right place.
Cryptocurrency futures are a type of derivative products that allow traders to speculate on the price movements of cryptocurrencies without owning the underlying asset.
Futures contracts are usually traded on centralized exchanges where parties involved in a trade have to trust each other and the exchange itself. As a result, centralization opens up many doors for potential problems to arise.
For example, counterparty risk is one of the main concerns when trading cryptocurrency futures. In this case, there is always a possibility that one side won’t fulfill its obligations after entering into a contract with another party and perform a trade on their behalf (i.e., margin trading). That’s why it’s vital to pick only trusted crypto exchanges that have proven to provide quality services.
A cryptocurrency is a digital or virtual currency that uses cryptography for security. A cryptocurrency is difficult to counterfeit because of this security feature. Many cryptocurrencies are decentralized systems based on blockchain technology, a distributed ledger enforced by a disparate network of computers. A defining feature of a cryptocurrency, and arguably its biggest allure, is its organic nature; it is not issued by any central authority, rendering it theoretically immune to government interference or manipulation.
The first decentralized cryptocurrency, bitcoin, was created in 2009 by pseudonymous developer Satoshi Nakamoto. It used SHA-256, a cryptographic hash function, as its proof-of-work scheme. In April 2011, Namecoin was created as an attempt at forming a decentralized DNS, which would make internet censorship very difficult. Soon after, in October 2011, Litecoin was released. It was the first successful cryptocurrency to use scrypt as its hash function instead of SHA-256. Another notable cryptocurrency, Peercoin was the first to use a proof-of-work/proof-of-stake hybrid.
Charles Hoskinson, one of the co-founders of ethereum, launched cardano in September of 2017. For supporters of this digital currency, ADA offers all of the benefits of ethereum, as well as many others. Cardano offers a platform for Dapps and smart contracts, like ethereum before it. Beyond that, ADA aims to solve some of the most pressing problems plaguing cryptocurrencies everywhere, including interoperability and scalability.
Cardano also hopes to tackle issues related to international payments, which are typically both timely and expensive. Through the use of blockchain technology, cardano aims to be the first cryptocurrency capable of securely processing and settling cross-border transactions in real time. The blockchain has the potential to eliminate the need for third-party intermediaries — such as banks — while simultaneously reducing or even eliminating transaction fees.
Cardano’s Ada token is named after 19th-century mathematician Ada Lovelace, who is credited as being the world’s first computer programmer. At $0.04 per Ada token at press time, Cardano is among the top 15 cryptocurrencies by market cap.