How Does Crypto Futures Work?

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Large crypto exchanges offer numerous financial tools for trading and passive income opportunities. Some options even allow making a profit on the downward market trend. In this article, we will answer the question, what is crypto futures and what assets are the best for this trading method?

Crypto futures is a financial instrument supported by major crypto platforms. It is similar to “betting”, but it is much more than that. The point of futures is to predict the asset’s value correctly. Traders’ abilities to analyze the market and forecast its future movement is the core of successful crypto futures trading.

How to trade crypto futures? In simple terms, there are two options (consider the BTC example):

  • A trader does the market research and concludes that the BTC value will increase over time, so one concludes an agreement on one of the largest crypto platforms to sell his Bitcoins on some exact day. The price and date are fixed in the agreement.
  • A trader’s research resulted in the coming BTC drop, so the trader sells his Bitcoins and then makes a contract for purchasing them on some exact date and at a reduced price.

If a trader’s research is correct and his prediction comes true, one receives a profit. In the first case, the trader sells his BTC at a higher value and makes money from the price difference. In the second case, the trader buys back BTC at a much lower rate.

Advantages of Crypto Futures

The first advantage of this type of trading is the opportunity to generate income even when the market is dropping. However, it requires analytical skills and experience. The second benefit from futures is reduced fees for transactions, compared with the spot market. The next thing worth mentioning is leverage. Leverage is borrowing funds from a crypto platform that allows a trader to enter the deal with a much bigger amount. For example, having $100, one can use the leverage of 10, 20, 40, etc., multiplying returns.

We recommend using the most popular crypto coins such as BTC, ETH, SOL and other top coins for crypto futures trading because these coins have the biggest liquidity, i.e., they are always in demand. Begin with these credible cryptocurrencies and gradually try some less-known ones. For more information about BTC futures, go to the WhiteBIT Blog.