There are different ways through which you can invest in Bitcoin and cryptocurrencies but Bitcoin and cryptocurrency futures trading is one of the best. Cryptocurrency futures trading has seen tremendous growth since it was started, which can be largely attributed to the increased number of crypto futures exchanges getting into the market.
You, therefore, have to carefully investigate the many exchanges to choose the best when venturing into Bitcoin and crypto futures trading. You have to evaluate the features of each of the exchanges against your goals since different exchanges offer different features that will influence your futures trading experience.
Some of the most sought-after features of a futures exchange include trading fees, types of futures, and the maximum possible leverage. One of the best-rated Bitcoin and Ethereum futures trading exchanges, BTCC exchange, has very favourable trading fees, a wide variety of futures., and offers maximum leverage of 150x, which is way above what most exchanges offer.
Crypto futures trading vs spot trading
When cryptocurrencies were first introduced, the only way that holders could trade them was through spot trading, which involves holding a specific cryptocurrency for you to sell it in exchange for another cryptocurrency or fiat currency. But after the introduction of cryptocurrency derivatives, it also became possible to trade cryptocurrency futures, which involves opening futures contracts on the price movements of a cryptocurrency without holding the actual cryptocurrency in a digital wallet.
Some of the exchanges that started with offering cryptocurrency spot trading have now also incorporated futures trading by providing alternative platforms where users can trade crypto and Bitcoin futures as well.
Cryptocurrency spot trading
In cryptocurrency spot trading, you are required to have a crypto wallet where you can hold cryptocurrencies. You then require to open an account with an exchange that offers spot trading and link your crypto wallet to it though other exchanges have inbuilt crypto wallets where users store their cryptocurrencies for trading.
Most of these exchanges are mostly pear to pear trading platforms where you identify another investor who wants to buy or sell a certain cryptocurrency at a certain price and you go ahead to sell or buy respectively. A good example of such a crypto exchange is LocalBitcoins.
In spot trading, you will be required to find a way of acquiring a certain cryptocurrency for you to trade it which makes you a target for hackers.
One of the main features of spot trading is that the settlement happens immediately since the buyer has to get the specific cryptocurrency they ordered while the seller gets fiat currency, stablecoins, or another cryptocurrency for the trade to be marked as complete.
However, for you to make a huge profit in spot trading, you have to have a large amount of cryptocurrencies. For instance, if you bought 1 BTC at $16000 and sold it at $23000, you would only make $7000. But if you had bought 10 BTC at the same price of $16000, and sold it at the same price of $23000, you would end up making a profit of $70000, which is ten times more.
Cryptocurrency futures trading
In cryptocurrency futures trading, you are not required to hold any cryptocurrency in a crypto wallet since futures contracts are derivatives instruments, which allows you to trade on the price movements of various cryptocurrencies without owning the actual cryptocurrencies.
Once you choose a futures exchange, you deposit some funds, which can be in the form of stablecoins or fiat currency depending on what the exchange allows, into your futures trading account. If you are to trade on BTCC exchange, for instance, you would be required to deposit USDT stablecoins.
Your trading balance then increases or reduces depending on whether you are making losses or profits in your trades.
In crypto and Bitcoin futures trading, settlements are made after the predetermined time expires. Different exchanges offer different expiration times ranging from daily, weekly, to perpetual contracts.
Also, the exchanges allow margin trading and provide you with leverages to enable you to open and hold larger positions than your account balance would allow. Different exchanges however offer different leverages with exchanges like BTCC offering some of the largest leverages of up to 150x.
Although margin trading is advantageous, it is two-edged. If your market speculations are incorrect, you could bear the brunt. The larger the leverage, the larger the profit you make per price movement when your market speculation is correct but also the larger the loss in case the speculation is against you.
If you are looking for a good investment in cryptocurrencies, you could consider going for Bitcoin and crypto futures trading over spot trading.
Cryptocurrency futures trading does not require you to hold the volatile cryptocurrencies in crypto wallets like in spot trading. This also makes it safer since it does not expose you to the risk of hacks which is very common with crypto wallets and spot trading platforms.
Also, in futures trading, you do not require to have a lot of money in your trading account for you to open a large position since futures contracts exchanges allow margin trading and you can choose the leverage you want to magnify the size of your position.
Futures trading is also 50% to 80% cheaper than spot trading where you will be required to pay about 0.1% to 0.2% of each trade.
BTCC Crypto futures exchange: https://www.btcc.com