A double-edged sword? Max gains or max pain? We explain how crypto margin trading and futures are different.
In hedging, investors take a position opposite to the one they hold with the underlying asset so that if they lose money on the latter, they will mitigate the loss through the futures contracts balancing their risk exposures and limiting themselves from any fluctuations in price.
In crypto futures trading, a contract is ratified between a seller who wants to lock in a price hoping for a profit at a specific date in the future and a buyer who will purchase the agreement as a hedge against paying higher prices if the asset grows in value. The contract value: the amount of cryptocurrency which forms the underlying asset covered in the contract;
Margin trading occurs in the spot market — a marketplace for immediate delivery — while futures relates to trades occurring in the derivatives market on assets to be delivered in the future.
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