Futures trading

Cryptocurrency futures trading is a form of derivatives trading, where traders enter into a contract with the promise to buy or sell a digital currency at a specific price at an established time in the future. Unlike spot trading, where the digital token is exchanged immediately, futures trading revolves around contracts that track the cryptocurrency price, enabling traders to speculate on price movements without owning the actual asset.

Cryptocurrency futures have been gaining traction due to their ability to offer larger returns through leverage, which means traders can hold more positions than their capital allows. It’s popular for hedging, speculating, and mitigating risk in the volatile crypto market.

Types of futures contracts

1. Perpetual futures: These contracts do not have an expiration date, allowing traders to hold positions indefinitely. They are popular among cryptocurrency traders due to their flexibility and continuous funding fees to maintain positions.

2. Fixed-term futures: These contracts expire on a specific future date, such as weekly, monthly, or quarterly futures contracts.

3. Inverted futures: The underlying asset (e.g., BTC) is used as the settlement currency instead of stablecoins.

Advantages of futures trading

• Leverage: Amplifies potential profits by allowing traders to control large positions with minimal capital.

• Shorting: Traders can make money when the cryptocurrency price decreases, by establishing short positions.

• No ownership required: Traders can speculate on price movements without owning the actual cryptocurrency.

Risks of futures trading

• Volatility: Prices are highly volatile, increasing the chances of liquidation, especially when using high leverage.

• Complexity: Trading futures is a risky and complicated endeavor.

• Funding fees: Traders holding on to perpetual futures will have to pay funding fees that are calculated based on the market, which may reduce gains.

Cryptocurrency Exchanges Supporting Futures Trading

• Kucoin (Popular exchange, operating since 2017. In our opinion, Kucoin is the crypto exchange with the most user-friendly interface we have ever seen.).

• Bitmart (Founded in 2017, BitMart has grown to become a prominent global cryptocurrency exchange, offering services to more than 9 million users across over 180 countries.).

• Deepcoin (Deepcoin, a cryptocurrency exchange founded in 2018 and headquartered in Singapore, has become popular among 10 million users worldwide.).

• LBank (LBank has gained popularity worldwide, particularly in Asia and Europe.).

Cryptocurrency futures trading offers tremendous profit opportunities, especially during a bear market. However, futures trading, particularly on margin, carries a level of risk that should not be underestimated and can only be successfully managed within the framework of a well-informed and disciplined strategy. For those prepared to navigate its complexities, it can be a powerful tool in the crypto market.