5 Benefits of Trading Crypto Derivatives

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Cryptocurrencies have been around for more than ten years and have revolutionized the way we trade. They are among the most talked about topics in the financial world, but they still have some limitations when trading them. Though many think that cryptocurrencies can’t be traded as easily as stocks or other traditional assets, this isn’t true. Some ways of trading cryptocurrencies make them almost as easy to trade as stocks or bonds! One way of doing this is through crypto derivatives. What are these? Let’s take a look:


1. Leverage

Leverage is a technique used by traders to increase their position size while keeping the same amount of capital in their accounts. A trader with $10,000 can enter into a 10x leveraged trade with only $1,000. This will allow them to control $100,000 of assets instead of just $10,000.

Pro Tip: Leverage is NOT a free lunch or magical money-making machine! You should always understand how much risk you are taking on and never use more than 2x leverage in any trade! It’s also important to note that if you go long (buy) on an asset and its price decreases, your losses will also be multiplied!

The benefits of using leverage are clear – when prices increase, it significantly increases your profits.

2. Volatility

Volatility is a measure of how much the price of an asset moves up and down over time. A more volatile asset can experience more significant price swings, which in turn means that you could stand to make or lose more money if you buy it. Crypto derivatives allow you to take advantage of volatility without taking on much risk. You can sometimes make derivative trades based on market volatility without owning any of the underlying assets themselves.

3. Spot Price Decoupling

Spot prices decoupling from futures, derivatives, and exchange-traded products greatly indicate that the crypto market is maturing. Decoupling means that the spot price will remain relatively stable despite the volatility of the futures or derivatives. In other words, when there’s an increase in traders using these instruments to profit off of volatility, it won’t significantly impact your asset management strategy – and vice versa.

This means you can focus on managing your assets and making decisions about which options to trade with confidence knowing that changes in market conditions won’t affect you as much as they would if you were trading spot price alone. When trading crypto perpetual contracts, you can take advantage of the marketplace’s volatility without worrying about expiration dates, as with regular futures trading. There are many opportunities for traders to take advantage of these advanced trading strategies. You can join FTX, learn more about your crypto trading options, and even start trading perpetual swaps through the FTX platform.

4. 24/7 Trading

The ability to trade crypto derivatives 24/7 is another benefit you won’t find with traditional investments. You can trade crypto derivatives at any time of day, including during market hours and after-hours.

This makes it easy for you to react quickly when opportunities arise and give yourself the option to take a break from the markets if needed. There’s no need for someone to wait for a trading session or weekend before they can get in on something new!

5. Diversity

It’s a common practice in traditional investing to diversify your portfolio. For example, if you have a bunch of stocks in tech stocks, then it may make sense to add some bonds and real estate as well to balance out your risk.

The same concept applies when trading crypto derivatives. It’s not wise to put all your eggs in one basket by buying the same cryptocurrency repeatedly with no plan for what happens if that currency crashes or takes off at an unforeseen rate.

Crypto derivatives can help provide diversity by allowing you to buy into different cryptocurrencies simultaneously instead of just one. You might also want to consider adding other types of assets like futures contracts (which are not perpetual).

Keep HODLing

As you can see, trading crypto perpetual contracts is a great way to make money. Unlike traditional stock markets, these derivatives are volatile and have been known to produce quick profits. While risk is always involved, using crypto options is the best way to learn about them.

With new exchanges opening up worldwide, getting involved in this exciting market has never been easier. We’ve covered five of our favorite reasons why traders should try out crypto-based contracts: leverage, volatility decoupling, 24/7 trading, diversity in instruments, and spot price decoupling. Start taking advantage of these new ways to trade crypto today.