First off - What Are Crypto Futures?
Futures are derivatives contracts that allow you to buy or sell a specific asset at a fixed price and maturity date. In the case of Bitcoin futures trading, for example, traders in the cryptocurrency futures market bet on the price of Bitcoin at a specific point in the future. So, by forecasting whether the price of BTC will rise or fall at a specific time and date in the future, traders can either take a long position and agree to buy Bitcoin at a fixed price when the Bitcoin futures contract expires or take a short position and agree to sell BTC at a fixed price when the contract expires.
A 'margin' is a small percentage of the actual transaction value that a trader must wager away during the trade on cryptocurrency derivatives exchanges. As a result, both counterparties involved in Bitcoin/Ethereum futures trading must deposit the marginal price, even though Bitcoin/Ethereum futures prices vary depending on market conditions, and even though the actual value of the transaction may be much higher.
When the price of Bitcoin/Ethereum rises, the holder of long-position profits. A seller, on the other hand, benefits when the price of Bitcoin or Ethereum futures falls.
Bitcoin Futures and Ethereum Futures
Bitcoin was designed to do one thing well: provide a way for people to transfer value without using a central bank anonymously. Ethereum was designed as a general-purpose blockchain with smart contracts that can perform an infinite number of functions. As a result, rather than serving solely as a store of value, Ethereum is capable of doing many things well.
Although Ether can be used as a digital currency, that is not its primary function. The Ethereum platform was designed primarily to monetize the operations of Ethereum smart contracts and decentralized applications (dApps).
Bitcoin's market cap in September 2021 is over $900 billion. The Ether market cap is approximately half that amount, at around $350 billion.
Because Ethereum is such a versatile platform, it does have a lot going for it in terms of volatility. This makes it an ideal pick for futures traders looking to speculate. Ethereum futures are financial instruments that allow you to speculate on the price of ETH at a later date. So, if you go long on ETH and the market closes at or above the price specified in the futures contract, you will profit. Alternatively, you can profit from a price drop by taking a short position in ETH.
On the other hand, Bitcoin is much more widely accepted as a cash substitute. It may be less volatile, but that also gives it an assurance of safety that other cryptocurrencies cannot provide. It is therefore the ideal pick for hedging your investments. Bitcoin futures allow investors to gain exposure to Bitcoin without actually owning the underlying cryptocurrency.
Bitcoin futures serve a variety of functions, each of which is unique to different actors in the Bitcoin ecosystem. Bitcoin Futures, for example, are a way for Bitcoin miners to lock in prices that ensure a return on their mining investments regardless of the cryptocurrency's future price trajectory. Investors use Bitcoin futures to hedge their positions in the spot market.
Why Should You Consider Bitcoin & Ethereum Futures?
Some advantages of participating in the cryptocurrency futures market are as follows:
Leveraging and Margin Trading
Margin trading or leverage is possible on cryptocurrency derivatives exchanges. Because the leverage available is often high and traders can open and close market positions with only a fraction of their personal balance, the contracts allow traders to make a relatively higher profit from a small initial investment.
Crypto futures enable traders to manage financial risks by allowing them to lock in a fixed price in advance. This protects them from fluctuations in the ever-changing crypto prices, as they can continue to pay that fixed price even if the actual price of a cryptocurrency changes. This is referred to as hedging a position: hedging allows traders to protect their investments.
You can profit from price fluctuations
Furthermore, crypto futures allow a trader to profit from changes in the price of a cryptocurrency. For example, an investor can profit from a predicted price drop in BTC by short selling in Bitcoin futures trading – betting against Bitcoin's price.
No need to hold a cryptocurrency itself
Participating in cryptocurrency futures exchanges allows traders to speculate on the future prices of underlying assets without purchasing the cryptocurrencies themselves.
All crypto futures exchanges allow people who cannot trade actual cryptocurrencies due to location-specific issues to bet on their prices; additionally, traders must spend less time gaining market exposure.
Traders can commit to multiple trades at the same time
Because trading in the cryptocurrency futures market requires only a margin of the underlying currency's actual price, traders can invest their funds in other, shorter-term trades instead.
Trading with C-Trade
C-Trade, which was founded in 2019, is a next-generation cryptocurrency derivatives trading platform that was designed and curated by a top-tier team of engineers, statisticians, and quantitative traders. C-Trade has created and continues to develop innovative industry-leading approaches for the best trading experience possible.
C-Trade distinguishes itself from the crowd through three distinct features:
1. C-Trade provides leverage of up to 150x on Bitcoin perpetual contracts.
2. The exchange is capable of processing up to 10 million transactions per second.
3. C-Trade employs machine learning to detect market manipulation.
Futures contracts can be used as a risk management tool, reducing risks and profiting from falling prices. Trading in cryptocurrency futures markets generates high returns, especially when margin trading is used. Furthermore, if you understand the markets for a specific cryptocurrency, you are more likely to make larger profits when trading futures with leverage.
For those looking to participate in Bitcoin and Ethereum futures trading, you can diversify their crypto portfolio by holding both Ether and Bitcoin rather than betting on a single crypto asset. Start trading Bitcoin Futures and Ethereum futures on C-Trade today!
Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. C-Trade, its affiliates, agents, directors, officers, or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same