Crypto Futures
What Are Crypto Futures
Crypto futures are contracts that let traders speculate on the future price of cryptocurrencies without needing to own the actual coins. These contracts obligate the buyer to purchase or the seller to sell a specific cryptocurrency at a predetermined price on a future date. The value of the contract is based on the price of the underlying cryptocurrency, making it a popular tool for traders who want to trade in the crypto market without holding the actual asset.
A futures contract is a legal agreement that outlines the details of the trade, such as the asset, price, and expiration date. Traders can use leverage, which means they can control a position larger than their initial investment. For example, with 10x leverage, a trader can open a position worth 10 times their own money, which can increase both potential profits and losses. To enter and maintain a futures trade, traders need to provide a margin, which is the capital required to back the trade. The initial margin is the amount needed to start the trade, and the maintenance margin is the minimum amount needed to keep it open. If the market goes against the trader, they may need to add more funds to avoid losing their position, known as a margin call.
Crypto futures offer benefits like leverage, allowing traders to gain significant exposure with a smaller investment, and hedging, which helps traders protect their portfolios against price changes by taking opposite positions in the futures market.