🔓Derivatives Trading

What is crypto derivatives/futures trading?

The derivatives market in the crypto market refers to the buying and selling of financial contracts that derive their value from an underlying asset, such as a cryptocurrency. Examples of derivatives in the crypto market include futures contracts, options, and swaps.

Derivatives can be used for a variety of purposes, such as hedging risk, speculating on price movements, or as a means of leveraging investments.

A future contract, for example, is an agreement between two parties to buy or sell a specific amount of an asset at a specified price on a future date. Futures contracts can be used to hedge against price fluctuations and make a profit by trading on the difference in prices between the contract and the underlying asset.

Options, on the other hand, are contracts that give the buyer the right, but not the obligation, to buy or sell an underlying asset at a specific price on or before a specified date. They allow traders to speculate on the future price movements of an asset, with the potential to make a profit or loss depending on the outcome.

A swap is another type of derivative where two parties agree to exchange one stream of cash flows for another based on an underlying asset, such as a crypto currency. They're used to manage risk and gain exposure to certain assets.

Derivatives in crypto market are mostly traded on specialized platforms like CME, Bakkt, or crypto-native exchanges like BitMEX, Bybit and Deribit. They can offer traders the ability to use leverage and make large trades with a small amount of capital. However, it also means that the potential for losses are greater as well, and it's important to understand the risks and how to use these products.

In summary, the derivatives market in the crypto market refers to the buying and selling of financial contracts that derive their value from an underlying asset, such as a cryptocurrency. This can include futures, options, and swaps, and they are used to manage risks and gain exposure to certain assets.