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Cryptocurrency futures - long-term earnings for enthusiasts

Traditional futures appeared almost a century ago, but cryptocurrency futures trading became available only recently - at the end of 2017. Since then, cryptocurrency futures have managed to interest many exchanges because they have opened up new opportunities for people to make really large investments. Looking at today's realities, as of the beginning of 2023, more than 6,000 different cryptocurrencies are available for trading, which shows that this economic sphere will not lose relevance for a very long time. Futures are the most popular cryptocurrency derivative. They give traders access to digital currencies without the need to own real assets.

Cryptocurrency futures trading differs from regular trading in many ways. It does not involve exchanging, selling, or holding assets - instead, it involves buying or selling a contract at a specific date in the future.

Cryptocurrency futures allow you to speculate on the potential value of a cryptocurrency - you can open a long position betting on a rise in price, or a short position betting on a fall in price.

One of the most important advantages of cryptocurrency futures is leverage usage. With it, you can increase the efficiency of using futures, because you won't have to use them all the time. But it is worth saying that although it increases profits, it also increases risks. 

Why invest in cryptocurrency futures? 

Investing in cryptocurrency futures offers great opportunities for stock portfolio growth. The leverage available in futures trading can easily increase a stock portfolio several times over in a single trade.

Another reason to trade futures contracts is to have some kind of protection, because when you trade conventional assets, the price can fall dramatically and you'll lose money. The situation is different with cryptocurrency futures. Unlike regular trades, which only profit when the price rises, cryptocurrency futures trades can profit even when the price falls. In addition, the ability to play assets both long and short provides greater flexibility and freedom to make predictions.

But where do you start with cryptocurrency futures?

Develop a good trading strategy

Creating your own trading strategy is a worthwhile endeavor. Of course, you can look up some guide on YouTube or any other social network and just copy it, but that cannot be called the right approach. The right approach means that you will develop a trading strategy according to your own personal goals and skills. To find the best one, try to follow these steps:

  • Determine what type of trader you are.
  • Determine your risk tolerance.
  • Decide which type of trading you prefer.
  • Make changes as you develop your strategy, testing it over and over again to see if it works.

A plan will help manage the sequence of actions more effectively. When creating it, you need to think through to the smallest detail how to implement the futures. Having a plan has a number of advantages. If you have a competently and concisely drawn up guide, you will save yourself a huge amount of stress and start trading in a more holistic way. 

How risky is this venture? 

First of all, you should think about the risks. If you're going to invest in cryptocurrency futures, you should determine your risk tolerance - that is, how much you can lose at most. Say if you have a thousand dollars invested, you can afford a maximum loss of $10 from one futures, etc. If you approach investing this way, even small gains will result in multiplication of funds. 

You should also be wary of irrational behavior. For example, compulsive trading - it can lead to the collapse of the whole idea. To avoid such extremes, you should minimize your use of money, and pursue only realistic goals, and never trade with money you really need. Also try to avoid investing in futures if you are used to doing so relying on luck alone. 

The cryptocurrency industry is constantly evolving, so it's critical to keep track of all changes and make timely decisions to stay ahead of the curve. A better understanding of market changes will allow you to better plan your future, so cryptocurrency futures, provided you are really knowledgeable in this subject, can be a very serious help in your semi-passive earnings.

What are cryptocurrency futures exist?

Standard futures

Standard cryptocurrency futures have all the aspects of a standard futures contract from traditional markets - they have expiration dates just the same. The first BTC futures contracts were launched in 2017. Typically, all such contracts are settled in dollars when they expire. Some crypto exchanges provide standard futures contracts. For example, exchanges such as Bybit and Binance. Most of them offer quarterly bitcoin futures and contracts that are usually settled in U.S. dollars. 

Futures with physical delivery

The only difference with physical delivery futures is that the cryptocurrency is actually delivered during the settlement process.

Perpetual contracts

Perpetual contracts are another popular type of cryptocurrency futures. Because they do not depend on an expiration date, perpetual contracts have been quickly adopted by many top exchanges. 

Perpetual contracts are kept afloat largely by funding. Traders pay each other based on their open positions during certain hours. The difference between the price of the perpetual contract and the spot price determines who pays and who receives. 

Team Hedgers
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