Trading Crypto Futures: Benefits of USD Contracts
As cryptocurrency continues to disrupt the economy, you may have heard of futures trading, one of the three tools used in transactions involving digital assets. Crypto futures are a type of derivative contract which obligates a trader to buy or sell an underlying digital asset at a fixed price on a pre-defined date. Essentially, what this offers investors is the ability to hedge against market volatility, which can be particularly attractive in times of market uncertainty. If you are looking to incorporate futures into your crypto trading strategy, USD contracts can be a good addition to your portfolio. In this article, we delve into what this contract entails and how it can augment your crypto trading strategy.
USD Futures in Crypto
USD futures are crypto derivatives denominated and settled in USD. In other words, the price of the contract is expressed in USD, and the contract’s settlement also occurs in USD. These types of futures contracts offer traders the ability to take a position on the price movement of a specific cryptocurrency without having to hold or manage the underlying asset.
Benefits of USD Futures
The use of USD as the currency of denomination and settlement in a crypto futures transaction offers several benefits as follows:
1. Reduced Volatility
USD futures are pegged to the US dollar, a well-established currency backed by the issuing government body. This significantly reduces any unpredictability or risk of fluctuations in the value of USD, making USD futures less susceptible to market volatility and presenting a safer option that some traders prefer. During periods when the value of your underlying coin takes a dive, USD futures can be an especially prudent choice as they hedge the risk of significant price fluctuations.
2. Ease of Calculating Returns
Another key benefit of USD settlement is the ease of calculating your returns. Compared to futures settled in coins, traders do not have to undergo the hassle of converting their profits from coins to an actual currency to know how much they have earned. This makes USD futures more intuitive and ideal for new investors who are starting out in the crypto trading world and not yet comfortable with more complex calculations.
3. USD Futures are More Accessible
The use of USD in the settlement of crypto futures enables investors to trade with a widely established currency with which they are more familiar. This makes USD futures trading more accessible to a wider range of investors from different backgrounds and experience levels, including those who may not be particularly well-versed in cryptocurrency.
Downside of USD Futures
While the stability of the USD benefits investors by reducing investment risks, this safety is not without its downsides. When trading with USD contracts, you may need to allocate a significant portion of your portfolio in USD to ensure adequate collateral for your futures positions. This can be less favorable for some traders as stability implies a smaller magnitude of appreciation in value compared to other assets, preventing you from maximizing investment gains from your capital.
Get More from Trading Crypto Futures on BIT
The numerous benefits USD futures offer make it an ideal addition to your portfolio to help you better cushion the impact of a bearish market. Whether you ultimately decide to engage in futures trading or trade other crypto contracts, you can easily meet all your trading needs on BIT. Founded as a full-suite cryptocurrency exchange under the leading crypto financial platform Matrixport, BIT offers a range of comprehensive features and financial tools to meet the varied needs of new and seasoned investors.
Built with a sophisticated Unified Margin system, BIT facilitates convenient spot trading and USD futures and options transactions under one account. Under this arrangement, you can avoid the hassle of shifting capital around for different instruments and be empowered to utilize your capital more efficiently. As a bonus, the unified margin mode enables losses of different positions to be combined to offset each other, supporting better risk mitigation. Start trading crypto futures with BIT today to unlock a more seamless and fruitful experience.