3 major mistakes to avoid when trading cryptocurrency futures markets
Many traders frequently express some relatively large misconceptions about trading cryptocurrency futures, especially on derivatives exchanges outside the realm of traditional finance. The most common mistakes involve futures markets’ price decoupling, fees and the impact of liquidations on the derivatives instrument.
Let’s explore three simple mistakes and misconceptions that traders should avoid when trading crypto futures.
Currently, the aggregate futures open interest in the crypto market surpasses $25 billion and retail traders and experienced fund managers use these instruments to leverage their crypto positons.
Futures contracts and other derivatives are often used to reduce risk or increase exposure and are not really meant to be used for degenerate gambling, despite this common interpretation.
Some differences in pricing and trading are usually missed in crypto derivatives contracts. For this reason, traders should at least consider these differences when venturing into futures markets. Even well-versed derivatives investors from traditional assets are prone to making mistakes, so it’s important to understand the existing peculiarities before using leverage.
Most crypto trading services do not use U.S. dollars, even if they display USD quotes. This is a big untold secret and one of the pitfalls that derivatives traders face that causes additional risks and distortions when trading and analyzing futures markets.
The pressing issue is the lack of transparency, so clients don’t really know if the contracts are priced in stablecoin. However, this should not be a major concern, considering there is always the intermediary risk when using centralized exchanges.
On Sept. 9, Ether (ETH) futures that mature on Dec. 30 are
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