Ever since the advent, cryptocurrencies have been a game-changer in the business world. With the help of the ingenious blockchain technology, cryptocurrencies have solved issues faced by the major industries and transformed them into a whole new level.
Despite all the fame cryptocurrencies have been gaining over the years, there is still a need for more refinement to bring in more adoption, to a greater extent. And to advertise cryptocurrencies more and bring in more use-cases, the most effective way is through crypto derivatives. Cryptocurrency derivatives have been gaining huge traction in recent years and Bitcoin is the most common derivative. If you are a beginner, let’s quickly take a look at what cryptocurrency derivatives mean.
What is a derivative?
The derivative is a financial product, which is either a contract or security, that depends on another asset to gain a value of its own. In simple terms, derivatives have no value without another asset or a stream of cash flows. Derivatives mostly depend on underlying assets such as stocks, bonds, currencies, commodities, etc. When the underlying asset is crypto, it is called a cryptocurrency derivative. In terms of crypto, a derivative is basically a contract between the involved parties based on the future price of the cryptocurrency.
The different types of derivatives include Options, Futures, Forwards, Swaps.
How derivatives benefit crypto trading?
- Manage and tackle price volatility. No matter what the current value of the crypto, customers can trade them at a predetermined price using derivative contracts which will reduce the chances of being prone to volatility.
- Derivatives help with price hedging. Derivatives provide a trading strategy to the users, by which a loss from one investment can be compensated by a profit in another derivative.
- Derivatives allow users to speculate future prices. This increases their profit chances.
- Crypto derivatives allow a contract for users to leverage up to 100X value. This helps users to expand their position in the market and gain a competitive advantage.
These are the basic concepts and benefits you need to know about cryptocurrency derivatives. If you want to develop a
cryptocurrency derivatives trading platform for your business as well, and attain such benefits, get in touch with an expert team such as Blockchain App Factory. With extensive experience and knowledge in the field, you are guaranteed a robust, feature-rich platform that will yield huge benefits and profits for the business.
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