When it comes to trading options, we must acknowledge that the cryptocurrency futures trading outperforms the crypto market. Here are the causes reasons.
1. Requires minimal or no investment
Trading in the crypto futures market offers a distinct advantage, which may surprise a novice. To trade, you don't need a large bank balance. You can make a profit by buying and selling digital coins without actually owning them. All you need is a rudimentary understanding of asset price movements to get started.
2. Large profit rates
In terms of returns, crypto futures are similar to a long-term SIP investment plan, albeit there are significant differences between digital currency and conventional investments that are outside the scope of this essay. To understand why the futures market is said to be high-returning, consider the long-term and short-term price movements of bitcoin.
If a crypto trader had invested in bitcoin by the end of 2020, he would have received about 130 percent dividends or profits based on the price shift from $26, 363 (29 December 2020) to $60,863.80. (13 April 2021). Even a tiny investment of INR1000 would have grown to INR2300. What if the stock market has plummeted? It's reasonable to pose the question. In this case, futures investors have the option of employing various types of hedging techniques.
Consider making a spot market investment. The price change in the spot market for a variety of cryptocurrencies is shown below. Examine the encircling spot price or current price of bitcoin. If you purchase and sell bitcoin on the spot based on the best bidding and best ask, you will most likely lose $6 per bitcoin. Even if the best bid and best ask values were swapped, the gain would be $6.
3. Low danger
Trading cryptocurrency futures is a kind of hedging in and of itself. Sellers and buyers avoid purchasing and selling on the spot based on the current price and instead use futures contracts when they believe the asset value will perform as expected. They join the contract with opposing views on market direction, but they both have one goal in mind: to obtain protection from any turbulent market circumstance and profit.
What should you do in the event of unexpected volatility? In the event that the price of your crypto assets falls, you may lower the degree of future risk. Short-selling, for example, serves as a kind of insurance.
Short-selling is the act of selling an asset with the expectation that the underlying asset's value would decline. You may purchase it afterwards at a lesser price and benefit from the difference.
How are the prices of cryptocurrency futures determined?
The price estimate is an assumption, but it is based on descriptive and predictive market data, forthcoming events, acquisitions, and so on. The spot price is also an important aspect in determining futures prices. The bitcoin exchange launches new futures contracts with three-month expiration periods. Bitcoin contracts, for example, that would expire in May were launched in March. Each month, 3-month away contracts are often introduced.
I hope you understand the advantages of picking crypto futures over crypto spot. Many exchanges, such as PCEX Membership, have made it simple to trade using your favourite instrument. Buying and selling crypto assets in Usd is really straightforward. We are one of the few cryptocurrency trading platforms in India that can provide you this option. Read to our most recent fintech blogs to remain up to date on the greatest crypto trading strategies and approaches. Trends & feature articles