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How do Cryptocurrency Futures Work: A Short Guide

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Trading on the crypto market has the same essence as trading in traditional markets – buying and selling assets, taking advantage of their price changes. While it is relatively easy to work with traditional finances, trading crypto is a somewhat challenging activity. The reason is the high volatility of digital coins, which is hard to predict and impossible to control. Crypto finances are not backed by traditional and stable funds (except for stablecoins, which are not used for money-making in trading). The crypto market follows supply-demand laws and fluctuates pretty often, creating opportunities to earn on the one hand and high risks to lose on the other. However, it does not prevent crypto traders from making enormous incomes in this field using even the most complex trading tools. One of them is futures trading crypto. Let’s find out how it works.

What is Cryptocurrency Futures Trading, and How Does it Work?

Futures is a pretty old financial tool used for speculation on asset prices. This instrument is also used for trading gold, gas, oil, and other valuable goods whose prices can be forecasted. Suppose you made calculations and concluded that the commodity’s price would grow in a couple of months, so you plan to sell commodities at a higher value. You make an agreement where you write the day and the price at which you will sell goods. In the reverse situation, suppose you think the value will drop significantly, so you want to sell goods and then repurchase them when they are cheaper. 

Similarly, it works with crypto coins, but the thing is that it is much harder to predict their prices because:

  • The crypto market is exceptionally volatile 
  • Crypto prices and supply do not depend on banks of government
  • Large investors sometimes artificially create a collapse in the market to drop the prices or vice versa, make a buzz around coins to increase their value
  • Cryptos are extremely sensitive to the news background.

Regardless of all the difficulties, advanced traders manage to make huge incomes from crypto futures trading. Of course, they use strategies:

  • Breakout
  • Long and short
  • Range trading
  • Spread
  • Pulback.

If you want to try this trading method, welcome to the WhiteBIT platform and blog. You can use a demo account on the exchange, and on the blog, you will learn every strategy in detail.

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