A futures contract is an agreement that obligates you to buy or sell an asset (in our case, cryptocurrency) at a predetermined price on a specific date in the future. Futures contracts can be used for both speculating on price changes and hedging (protecting against price risk).
How cryptocurrency futures work:
Contract: When you purchase a futures contract for cryptocurrency, you agree to buy or sell the cryptocurrency at a predetermined price in the future.
Price: The price of a futures contract may differ from the current market price of the cryptocurrency, depending on how much the market expects the price to change.
Expiration date: A futures contract has a fixed expiration date, after which it is either fulfilled or closed.
Leverage: In cryptocurrency futures trading, you can use leverage, which allows you to trade a larger volume than you actually have in your account. For example, with 10x leverage, you can trade an amount 10 times greater than your deposit.
Types of futures contracts:
Traditional futures: These contracts have a clearly defined expiration date. For example, Bitcoin contracts with an expiration date at the end of the month.
Perpetual Contracts: These are futures contracts with no fixed expiration date. They are traded like regular assets on the exchange, and their price tracks the price of the underlying asset, such as Bitcoin. This is a popular instrument on cryptocurrency exchanges.
Risks when trading futures:
Leverage risks: Using leverage increases both potential profits and losses. If you use 10x leverage, you can lose your entire deposit faster than if you were trading without leverage.
$Price uncertainty: Futures allow for speculation on price, but accurately predicting how the market will behave is quite challenging. Price drops or increases can be sudden and sharp.
