(Gold or ashes? Things to consider when using cryptocurrency futures)
Last 24 hours More than 400 million USD was liquidated in the cryptocurrency derivatives market, with the majority being Long positions.
When investing in the cryptocurrency market, the use of futures contracts requires careful consideration. Here are some pros and cons to keep in mind:
Advantage:
- Can increase leverage, increase opportunities for quick profit.
- Perform direct transactions on the derivatives market, more flexible than buying and selling spot cryptocurrencies.
- Can be used to hedge price risk (hedge) in an investment portfolio.
Defect:
- Huge risk due to using high leverage, which can lead to quick losses.
- Need to have in-depth knowledge and skills in derivatives trading.
- Liquidity and price fluctuations in the derivatives market may differ from spot cryptocurrencies.
- Bear many other risks such as credit risk, transaction risk.
Therefore, for new investors, it is often safer to focus on spot trading of cryptocurrencies before entering the derivatives market.
You should carefully consider your knowledge, risks and tolerance before using futures contracts.
For newbies who do not have enough knowledge and experience to analyze themselves, I recommend investing in spot trading.