Trading with cryptocurrencies is something that is becoming more and more popular. When you have found a good buying moment based on your analysis and then sell at the right time, you can make good profits with crypto. But did you know that you can also make profits with crypto trading at declining prices? In this article you can read three different ways to trade crypto with which you can get even more out of trading!
Bitcoin (BTC) futures
Futures allow traders to speculate on the future bitcoin (BTC) price. They can also protect, or hedge, their existing positions against unexpected price movements. But what are futures anyway?
Where you normally buy bitcoin from a seller at the current market price (spot market), a futures contract is a contract between two parties. That contract includes when and for how much a bitcoin must be sold or bought.
Suppose a trader expects the bitcoin price to fall, then he or she can sell a contract for the current price. Let’s say the current price is at $ 55,000. So the contract will be sold at a price of $ 55,000. If the bitcoin price does drop, the trader can buy back the contract for a lower price just before the expiry of the contract.
Suppose the value of the contract has fallen to $ 50,000 due to the falling bitcoin exchange rate, then the trader can buy back the contract for $ 5,000 lower. The trader thus makes a profit of $ 5,000 despite the fact that the bitcoin price has actually fallen. This is also called going short. This is one of the many ways that bitcoin and crypto futures can be traded.
Bitcoin option contracts
Bitcoin option contracts are similar to futures, however there is a big difference between the two. A futures contract obliges the parties to settle the deal as soon as the contract expires, regardless of the current market price. An option contract only gives the owner of the contract the right to execute it.
There are two types of option contracts; call and put options. A call option gives the right to buy and a put option gives the right to sell. The price for this depends on the strike price. This is the price at which the contract will be executed, should the owner wish to exercise his right.
Option contracts also give traders the opportunity to generate returns in a declining market. The difference is that the owner is not obliged to perform the contract. He or she does have the right to do this, for which the trader pays a premium. When the price is favorable and when the contract is profitable, the owner can choose to execute the contract. If he or she does not do this, the trader will only lose the premium amount.
Both futures and options contracts can be traded with leverage. This means that the trader can trade with larger contracts without having to own the entire underlying capital. In that case, you trade with borrowed money. This means that you can make bigger profits because the contract size is larger. However, it also means that the risk is higher. So be aware of this.
If you want to trade with leverage, but don’t want to worry about all the technical things about futures and options? Then you can also choose to trade with leveraged tokens. Each crypto has different leveraged tokens. For example, the FTX exchange offers an ETHBULL 3x token. For every percent that ETH increases, the ETHBULL token increases in value by 3%. FTX explains how these tokens work exactly:
“Each leveraged token sees its price action by trading FTX perpetual futures. For example, say you want to create $ 10,000 worth of ETHBULL. To do this, put in $ 10,000, and the ETHBULL account on FTX will buy $ 30,000 worth of ETH perpetual futures. ETHBULL is now 3x long ETH. ”
With each of these products, it is important to first read carefully about how they work exactly. FTX offers an extensive but clear platform that includes the aforementioned trading instruments!