Derivatives enable an opportunity for traders to speculate on the potential value action of digital currencies without owning them. By taking advantage of these financial instruments, investors can generate profits from price changes while avoiding any ownership-related risks.

With various forms of derivatives, futures, swaps, and options are some of the most traded choices. Here’s a simple description of them:

• Futures are an incredibly advantageous investment instrument that offers substantial potential for gains. Traders can buy crypto contracts at a pre-agreed value and day, granting them the opportunity to sell them if the value has increased. For example, you could buy a crypto futures product expiring in three months with $60 000 as its preset rate – then, should the coin’s worth jump up to $70 000 within those three months, you’d be able to yield impressive profits from this venture. If the value falls below your purchasing point of $50 000 by expiration time,  it would mean losses for yourself, unfortunately.
• Crypto options provide investors with the privilege to buy or trade assets at a pre-arranged value and date in the future. For instance, let’s say you purchase a Bitcoin option that grants you the right to acquire BTC for $60 000 within three months. This crypto option gives you more control over your investments while limiting risk exposure as well. In three months, if Bitcoin’s price reaches $70 000, the investor can buy it at a lower cost before selling it to make a large profit. On the other hand, in case of any decrease in its value, for instance, down to $50 000, they are free not to buy Bitcoin and thereby avoid all potential losses asides from that of the initial investment.
• Swaps. Crypto swaps are agreements where two parties promise to exchange a sequence of payments according to the rate of an underlying cryptocurrency. For instance, one entity could agree on paying the other side the difference between Bitcoin’s present cost and its price from three months ago, while their partner agrees on giving them compensation for Ethereum’s disparity between today’s cost and what it was three months back. Swaps are frequently used to partially shield from price changes or to speculate on the price movements of multiple cryptocurrencies concurrently.

Although crypto derivatives can be advantageous for those investors wishing to manage their risk exposure or capitalize on market opportunities without owning crypto, they may also involve significant complexity and risk. Therefore it is vital to thoroughly research the possible rewards and dangers associated with these instruments.

To learn how to trade cryptocurrency, welcome to the WhiteBIT cryptocurrency exchange. It allows practicing your cryptocurrency trading skills and try different trading methods without fear of losing real money on a demo account.