As the number of users who have bought crypto at least once increases, which is 350 million more than it was five years ago, demand for exchange-traded products, including futures, which promise huge profits... and risks, is also growing.
⚡️Differences from spot trading:
In spot trading, we operate on the principle of "buy today - sell tomorrow", but futures work a little differently. Futures trading is different in that you do not actually buy or receive cryptocurrency immediately. Instead, you enter into an agreement "to buy or sell a certain amount of cryptocurrency in the future at a price that you determine now". The main thing here is that you are working with a promise of a future transaction. You do not have the asset in your hands, but only its value.
📊 Short, long and shoulder
Both long (expecting the price to go up) and short (expecting the price to go down) can be entered using leverage. For example, if you have $100 and the exchange leverage allows you to increase this amount by 10 times, then you can trade $1,000. This means that any change in price will have a 10 times greater impact on your profit or loss.
🔵 Long with leverage: You bought $1,000 worth of cryptocurrency with x5 leverage. If the price rose by 10%, your position is worth $1,500 instead of $1,100. Subtract the initial $1,000 and you get $500 in profit. But if the price goes down, you will also lose 5 times more (if the price falls by 10%, you will only have $500 left).
🔵 Short with leverage: You "sold" $1,000 worth of cryptocurrency with x3 leverage. If the price fell by 10%, your profit would be $1,300 instead of $1,100, but if the price went up, you would lose 3 times more. So, if the price rose by 10%, you would only have $700 left.
🎲 Similarities with casinos and gambling addiction:
In spot trading, your profit or loss is limited to the actual value of the cryptocurrency you bought. In futures trading, your profit or loss depends on the price change relative to the price in your futures agreement. This means you can make or lose significantly more than your initial investment.
Somewhat similar to a game of Blackjack, users get the illusion that they are making their own decisions and are in control.
P.S. Nevertheless, for users who read the market perfectly, this is a good mechanism for increasing profits, but since we do not control external processes that affect the rate, elements of gambling addiction are present in futures trading. Unlike spot trading, which is more related to investing.
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