What is a Derivative?
A derivative is a financial contract with a value that is derived from an underlying asset. Derivatives have no direct value in and of themselves — their value is based on the expected price movements of their underlying asset. When the underlying asset is a cryptocurrency like Bitcoin, they are termed as Cryptocurrency Derivatives. Trading Crypto derivatives doesn’t actually mean buying or selling cryptocurrencies. It provides an alternative path to get exposure to the underlying cryptocurrency.
Derivatives are often used as an instrument to manage financial risk at the expense of high returns for the other party.
There are mainly 4 types of Derivatives –
What are futures?
Futures are contracts that facilitate the buying or selling of an underlying asset at a predetermined price at a future point in time. Counterparties are obligated to fulfil the terms of the contract, either buying or selling the asset at the decided price on the date of expiry. There are special types of futures which come with no expiration date. These futures are called
What are Cryptocurrency Futures?
The contracts are still settled at the predetermined price.
Crypto futures allow you to speculatively trade on the future prices of cryptocurrencies without owning the cryptocurrencies. When two parties enter into a crypto futures contract, they agree to buy/sell an asset or security at a pre-fixed price on a selected date in the future. The price of Cryptocurrency futures is directly proportional to the prices of the underlying cryptocurrencies. Users of CoinDCX can trade both Bitcoin and Altcoin futures on the platform.
Traders can enter positions that are larger than their account balance
Futures vs Margin Trading:
Cryptocurrency Futures are always superior to margin trading because futures provide:
Future contracts allow much higher leverage than the maximum leverage allowed in Margin trading. On CoinDCX, Cryptocurrency futures can be leveraged to as high as 15x whereas margin trading is capped to 5x.
Margin trading market is a borrowing market which are hard to build, and as a result, have lower liquidity. Future markets are more liquid than spot markets since they are free of this limitation and are easy to develop.
No Cost of Interest:
The futures contract will either trade at a premium or discount. There are no costs of interest involved in holding the futures. In the case of margin trading, CoinDCX offers interest-free margin trading for first 1 hour and charges 0.05% per day thereafter.
CoinDCX – India’s first Cryptocurrency derivative exchange
CoinDCX is India’s first cryptocurrency derivative exchange which offers immense liquidity on its Bitcoin and Altcoin future products. CoinDCX allows its users to trade cryptocurrency futures with up to 20x leverage. Maximum leverage limit for every futures contract can be found under the contract details section on the trading terminal.
Future Trading on CoinDCX –
CoinDCX has future trading on Bitcoin and 8 leading Altcoins. These are Ether (ETH), XRP (XRP), Bitcoin Cash (BCH), Litecoin (LTC), Eos (EOS), Cardano (ADA), and Tron (TRX). Users can also trade perpetual future contracts with Bitcoin and Ethereum perpetual futures.