First, a quick intro on Futures
If there is one thing going for cryptocurrencies, it’s diversity.
The crypto world is populated with a wide array of coins and tokens that underpin a plethora of projects the world over. An investor would be spoilt for choice.
Yet this sheer diversity compounds the problem of actually deciding which option to take, and why. Some people would choose an established coin over anything else because of its perceived popularity, for example. Others may like to try something newer. The range is there to try out.
But irrespective of which option someone takes, there is little or no guarantee that the investment will work out long term.
Certain mechanisms exist in the financial world to provide at least some protection for investments. Futures is one of these devices.
Futures are essentially contractual agreements between two or more parties that specify a future date to buy or sell an asset at a certain price. These financial devices have been used for decades, and have also begun to be applied to cryptocurrencies in recent times.
Bitcoin Futures: How to invest
Bitcoin has been around for a while. The cryptocurrency that started it all is still going strong, despite wild fluctuations in price and value over the years.
Bearing in mind the concept of Futures as explained above, when two or more parties enter into a Bitcoin Future contract, they effectively “bet” on what they believe the price of Bitcoin will be in the future.
Bitcoin Futures enjoys two major advantages over ‘traditional’ Bitcoin investments:
Bitcoin Futures can be traded on regulated crypto-exchanges
Investors living in countries where Bitcoin is banned may still place ‘bets’ on Bitcoin prices, as actually owning Bitcon is not required
If you are thinking of trading Bitcoin Futures, there are two major considerations: First and foremost, why you’re doing it in the first place. Are you simply speculating, or are you protecting your Bitcoin earnings from a future crash which may or may not happen?
The second issue is your choice of exchange to trade in. There are plenty crypto exchanges out there, but you should perhaps consider the one with the largest number of Futures contracts issued.
Like any other financial investment, crypto or otherwise, you are strongly advised to do your own due diligence before parting with your money.
Written by: Fernando Sanchez