DIFFERENCE BETWEEN REAL CRYPTO AND FUTURES TRADING
Trading crypto like a stock and using leverage to trade it would be an interesting option for most people, after all, crypto has the habit of a sharp rise without any market limitations, and if you could use the leverage of even ten to one, you could potentially make ten times your profit. But is that actually a smart idea?
The first thing that comes to mind is how soon you could lose your money, because, needless to say, just like its sharp rises, you could lose just as fast, and if your investment platform doesn’t have negative balance protection, you might end up owing money as well. But some people will argue that they will use stop loss. Ok, let’s explore that. You have started trading with leverage, and you use stop-loss; with crypto being a 24/7 market, unless you are a day trader who is willing to stay up, it’s impossible to track all crypto volatility. Therefore, you might end up with stop loss after stop loss.
Why use crypto futures?
This might be shocking, but there are a lot of benefits of crypto futures. For one, you won’t pay transaction costs. Ethereum and bitcoin have huge transaction costs due to their increasing value. Another benefit of futures trading is that you won’t need a wallet, which is becoming increasingly annoying for most people who are usually beginning in crypto trading. This is mainly because each coin is on its own chain right now, and you need a separate wallet and security concerns of having a lot of different wallets. On that note, feel free to check out Bitunivex wallet, it’s free, and you can hold more than 30 cryptos and unlimited tokens on it in the same place; it also has military-grade encryption for security. Futures trading is also becoming more and more popular because banks worldwide are starting to refuse to accept crypto profits. While with futures, it’s kind of like a stock, and you won’t encounter any problems. Furthermore, you can use financial instruments like leverage and stop loss and take profit, etc., in your trading, and this scene might be more familiar for people with a currency trading background.
Why shouldn’t you use crypto futures?
The biggest disadvantage of futures is that it’s not real crypto, and it doesn’t hold any of the real crypto value. Your profits and value are actually not from the crypto itself but dependant on a company. You can’t send it anywhere, which is the core functionality of cryptocurrencies. You can’t cash it into your bank or numerous financial institutes or debit cards that accept cryptocurrencies. You can’t spend it, and it’s basically not fungible. It’s also not decentralized, meaning that the institution will have the last word. They can refuse to cash out your profits and even deny a transaction if they see fit. One of the benefits of cryptocurrencies is that you can hold multiple different ones in the same place and diversify your portfolio, but with futures trading, you are actually limited to one place, even if you are buying different cryptocurrencies since they are not real crypto (some people disagree with this notion and argue that at the end of the day they are trading different cryptos even if its futures, but as we mentioned, it’s all dependant on the institution, futures are basically a contract between you and the trading company they can refuse, deny or cancel the contract whenever they want to and this is the precise meaning of decentralisation, in real crypto, no one can do anything ) another effect of futures trading is that your purchase or sale, won’t affect the crypto price, essentially you are buying crypto (technically) but your demand is not counted as real demand for crypto value to go up, and if more people trade crypto this way, the value won’t be real anymore, because more people are using it but it’s not affecting the price.
Having said all that, we should note that there are different kinds of futures. Big crypto companies are starting to offer different kinds of futures trading. And at the end of the day, if you think the benefits of futures trading outweigh the disadvantages for you, go for it. Cryptocurrencies were invented for decentralization. A currency without a boss or force. A currency where people would control its value. If you think that idea is important, why not help it by using real crypto? You would make the same profit/loss, but you will help the fundamental idea of blockchain technology and its cryptocurrency application.
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