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Why Trading Crypto Derivatives

If you are aware of derivatives in our traditional financial system and have some idea about what cryptocurrencies are, you already know about crypto derivatives. A crypto derivative is a financial commodity with an underlying asset value. Basically, the trading of an asset between two parties is defined by a financial contract which is known as a derivative. This derivative derives its value from the underlying asset. These derivatives use the crypto spot price that allows investors to take advantage of their leveraged positions. It means that the investors can take on more risk than the capital actually owned by the underlying crypto asset.

More complex techniques can now be easily implemented by crypto derivatives, which makes its operation way more robust and efficient against the traditional spot margin trading system. Furthermore, such applications are allowing cryptocurrencies to provide comprehensive services in the financial world, leading the way towards mass adoption.

Let’s explore the benefits of Crypto Derivatives deeply and attain a better understanding of their fundamentals.

Why Trading Crypto Derivatives is beneficial?

● Volatility defense

In the blockchain ecosystem, even the slightest price changes carry a significant effect. Crypto Derivatives lock a fixed amount of price for the specific time, with respect to the commodity to the dealer which protects the user from high volatility and tremendous losses that might otherwise follow.

● Closure

In other cryptocurrency holdings, some traders (particularly institutional traders) and investors use crypto derivatives to defend their positions.

● Speculation and manipulation

Investors are now using crypto derivatives to bet on potential commodity values, and the opportunity to hedge their bets makes big, speculative games simpler. This opens a whole new world of investment opportunities for the people.

Now that we have a better understanding of crypto derivatives, let’s have a look at the types of crypto derivatives and understand them in-depth.

Types of Crypto Derivatives

● Futures

The most popular crypto derivative type as of now is Crypto Futures. In this, the buyer and seller can purchase or sell the asset at a specific trade rate on a chosen date without anyone of them backing out, just by using a future contract. As soon as the transactions are settled, the futures contract expires.

● Options

Options are a type of crypto derivative which allows the buyer to purchase or sell the underlying asset at a particular price at a certain point in time. Instead, if the buyer wishes to exercise his right to purchase, the seller has the duty to deliver the asset.

Calls and puts are two kinds of options. The buyer of call can choose to exercise their right to buy (sell) the underlying asset from the seller on expiry at the specified strike price. The put option gives the right to sell and the price increases with the decrease in the rate of the digital coin.

● Swaps

Swaps have become an integral part of the crypto space wherein the user can exchange their cryptocurrencies with other cryptocurrencies. In other words, a cryptocurrency payment is completed through another cryptocurrency only. For instance, Bitcoins can be bought, by paying the sum in equal altcoins (like Ether).

● Perpetual

Similar to futures contracts, perpetual contracts can be extended on other derivatives. The only difference that makes them much more powerful is that they do not have any expiry date. Perpetual swaps resemble fixed-maturity futures but don’t settle. However, for a given amount of time, the buyer must pay a fee to book the asset.

● Forwards

Forwards is a contract which can be tailored to meet the trader’s needs. This is typically performed on OTC (Over-the-counter) exchanges.


The crypto revolution is here and crypto derivatives are the epitome of how cryptocurrencies are becoming the future of our financial ecosystem.

Crypto derivatives are a perfect choice to take into consideration — for newcomers and experts. One can choose the right crypto trading site, and certainly would not be deceived ever. To read more about investing in crypto derivatives, go to Capital Finance, and have a detailed insight into the concerning and many other top trends in Blockchain.



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Capital Finance

Capital. Finance is a Defi project based on Ethereum's blockchain that creates a new DeFi exchange allows users to swap tokens with serval other use cases.