Before you take your first step to cryptocurrency futures trading, you must have a fair idea of crypto futures trading and whether you can make money as others did. You must be aware that Cryptocurrencies are digital coins, and you don’t hold them physically. Still, you can pass them from peer to peer on the internet, which is completely dependent on blockchain technology. Blockchain technology is often called a blockchain network, and each transaction is verified by participants called miners. They take this effort to verify the transaction because they get compensation for the verification process, making each transaction foolproof and authentic.
If you got this far, you should have some idea about the futures contract. A futures contract is an agreement to buy or sell cryptocurrency at a future date. There is no instant transaction carried out here, but both parties to the deal fix a price for the cryptocurrency at a future date. It means cryptocurrency buyers will only purchase the currency at that value, irrespective of whether it may go down or up on that date. The seller also agrees to sell on the agreed fixed value regardless of whether the value goes up or down on that date.
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Specifications of Futures Contract
It is generally seen that futures contracts on cryptocurrency futures trading are uniform. It means the transactions carry a specific number of assets per contract, and each of these contracts has a maturity date. After this date, the trade ceases and is declared closed. It means that both the buyer and the seller in the futures contract must meet their obligations daily.
Again, it is generally seen that investors are provided with information on their exchange about the volume traded daily. They also offer a 30 days average of that volume so that investors can make informed decisions. You will find that the most widely traded futures are the Bitcoin Futures, with each contract having a maturity date that is strictly followed. Quarterly contracts get listed like March, June, September, and December.
Another noticeable factor of futures trading is that your broker will settle futures contracts daily. During this time of the day, your broker will determine the margin requirements and the cash balance you require in your account with them. It means that every open account is settled each day during an interval. It means that investors become more binding on the contract than in equity shares.
Benefits for Investors of Futures Trading in Cryptocurrencies
One of the main benefits of trading with cryptocurrencies is that futures provide you with leverage. It is done with borrowed capital, and each broker has a margin requirement. When you get leverage like this through your broker, your profit can be several folds higher, and so would the loss. However, you need to open a digital wallet account first for your futures trading, and since it is all liquid, you can easily enter and exit your positions.