Futures is a financial instrument that has been used for around 100 years now. It works with valuable commodities, precious metals, gas, oil, etc. The essence of futures trading is predicting the future commodity’s price and betting on it. That is a highly risky instrument advanced traders use.
In the cryptocurrency market, futures trading is also possible. Thorough research and in-depth knowledge of the crypto market are needed for efficient and successful futures trading. Let’s see how it works.
Futures Contracts in Crypto
What are futures in crypto? This financial tool implies making a contract on selling or buying an asset someday and at a pre-agreed price. Suppose you estimated that the BTC price would grow in the future. So you make a futures contract on one of the popular exchanges and fix the price and the date. Once the contract expires, you must sell BTC at a pre-established price. Of course, if your forecast is wrong and the BTC price moves in the opposite direction, you bear losses.
Another situation is when you think the BTC price will drop and buy a contract where you fix a lower price. On the contract’s expiration day, you have to buy BTC at a reduced price (if your prediction is correct, you really do, but if the BTC price increases, you waste more money on committing your obligations).
Bitcoin futures are the most popular because this financial tool is only efficient with credible and liquid crypto assets. Bitcoin is the asset with the most considerable liquidity and the lowest volatility.
Crypto Futures Exchanges
There are some large and credible crypto platforms enabling futures trading:
- Binance
- FTX
- KuCoin
- WhiteBIT.
It is advisable to begin futures trading on a user-friendly platform like WhiteBIT. In this case, Binance may seem to be too difficult for a novice trader. WhiteBIT offers a convenient interface and a WhiteBIT blog where the futures trading mechanism is described. Also, you can practice futures trading on the WhiteBIT demo account.
