How do you Make Money From Cryptocurrency Futures?
So, now that we’ve gone over the major contract specifications of cryptocurrency futures-now let’s look a little more in-depth at profit and loss basics. Perhaps the most effective approach to assist you grasp these fundamental indicators is to provide you with a thorough example.
Let’s suppose you’re looking to trade BTC/USD futures.
- At the time of the trade, Bitcoin is trading at $41,000
- Each contract is worth 0.001 BTC – which amounts to $41 at current prices
You believe that Bitcoin will be less than $41,000 soon enough and as a result, you opt to go short on BTC/USD futures and invest 100 contracts total.
Let’s see how things turn out for this trade.
- Bitcoin has been trending down after your short entry and is now is trading at $32,000
- You are happy with your profits and do not wish to hold the position any longer
- As such, you close the position
- You entered the trade at $41,000, and you closed your position at $32,000
- This a price movement of $9,000
- However, you were trading micro futures at 0.001 BTC per contract
- As a result, your earnings are actually $9 per contract.
- You purchased 100 contracts in total – thus your overall profit from the trade is $900.
Why CFDs are Better Than Cryptocurrency Futures
Throughout this guide, we’ve given a quick overview of the advantages of trading CFDs – rather than standard futures contracts – especially if you’re a small trader. There are several reasons behind this, which we go through in the sections below.
- Minimums: If you want to trade traditional futures contracts, such as those offered by CME Group, you will need a significant sum of money. The minimal transaction amount on many crypto exchanges are as little as $25 when trading leveraged cryptocurrency CFDs.
- Expiry: If you have a cryptocurrency future contract still outstanding when the market closes, you may find yourself in an uncomfortable position. This is because you may be forced to take delivery of the corresponding digital asset. CFDs never expire, which means that you won’t have to worry about your settlement date. As a result, you can keep your position open as long
- Asset Diversity: If you like the look of a certain cryptocurrency futures platform, you’ll probably be able to trade only BTC/USD. When trading cryptocurrency CFDs, on the other hand, you will have access to many more markets throughout a bigger range of exchanges. This includes both fiat-to-cryptocurrency (e.g., EOS/USD and LTC/GBP)
- User-Friendliness: You’ll enjoy a very easy and user-friendly experience if you trade CFDs through a regulated exchange like FTX. You may simply add money with a debit/credit card or e-wallet, and getting verified takes a few minutes. Plus, finding a suitable cryptocurrency to trade and placing buy and sell orders is straightforward and quick.
Finally, if your main goal is to speculate on the future value of digital assets with leverage – and you have the option to go long or short – CFDs are unquestionably the superior alternative than ordinary futures.
In conclusion, cryptocurrency futures are popular among traders who want to bet on cryptocurrencies in a more sophisticated way. This is due to the fact that futures allow leverage, short-selling, and a variety of advanced trading techniques.
However, because this sector of the regulated trading market needs a substantial quantity of money, retail clients will be better suited for CFDs. This financial tool works similarly to futures in that you don’t need to own the underlying tokens and can use leverage and even short-sell. CFDs do not have an expiration date or require a large amount of capital
To get started with your first leveraged crypto trade at FTX or Kucoin, you can open a position in less than five minutes by creating an account and making an immediate deposit with your debit or credit card or e-wallet.