Futures trading lets you make bets on whether a cryptocurrency’s price will go up (long) or down (short), without actually owning the crypto.
Here’s the basic idea:
- The Contract: You sign a contract to buy or sell a certain amount of crypto at a specific price on a future date.
- Expiration Date: The contract has an end date. On that date, you settle up, even if you no longer want the crypto.
- Leverage: Many futures exchanges allow leverage, which means you can control a large amount of crypto with a small deposit. This magnifies both potential profits and losses.
Why Do People Use Futures?
- Bet Against the Market: You can make money even if crypto prices fall.
- Hedge Other Holdings: Futures can help offset the risk of crypto you already own.
- Bigger Potential Profits (and Losses): Leverage lets you make much bigger bets than simple spot trading.
The Big BUT: Futures are VERY Risky
- Easy to Lose It All
- Leverage means small price movements can wipe out your entire investment.
- Complex: Futures can be hard for beginners to understand.
- Expiration Dates Matter: You’re locked into the contract, even if the price moves against you before the expiration date.
The Big Idea: Futures trading is like advanced-level gambling on crypto prices. It can be profitable, but most beginners will lose money. If you decide to try futures, be extremely cautious and only invest a tiny amount.
