Things You Need to Know About Crypto Derivatives
The crypto market is in many ways similar to the stock market. While we cannot deny its uniqueness in being a digital asset, the procedures for trading and making profits run parallel to the stock market.
Derivatives are one such example. In general terms, derivatives are financial products whose value depends on another asset. Derivatives can be contracts or securities and get their value from (crypto) currency, commodities, market stock, interest rates, and bonds, among other assets.
Over the years, derivatives have become popular financial tools. In the crypto market, derivatives are traded among customers (C2C) and on exchanges, though the way they are regulated and traded is different. Businesses use crypto exchange software development services to integrate derivatives trading on their platforms.
Types of Derivatives
Derivatives are usually divided into the following types.
Use of Derivatives in Crypto Trading
Derivatives are usually used to speculate on the future or handle risk quotient in the volatile market. In the crypto market, derivatives are used to get benefits from the fluctuations in the price of the cryptocurrencies.
By using cryptocurrency exchange software development, some platforms are offering traders to trade in derivatives and contracts, though it is still quite limited to few altcoins and Bitcoin.
Why is Crypto Derivatives Important?
With the success of existing crypto exchanges that offer trading in derivatives, it can be said that there will be an increase in the number of platforms providing options and futures trading. Analysts and experts are of the opinion that derivatives will continue to gain popularity as more trading options between cryptocurrencies and fiat are offered to the traders.
The market competition is getting fierce with famous and new companies announcing collaborations and services for crypto derivatives on their exchange platforms. More professional traders are opting to trade in derivatives for both short-term and long-term.
The trading volume has been showing a steady increase, signaling that the crypto market is more than ready to accept derivatives, even if the newcomers might feel overwhelmed with the complexities of the process. In fact, exchanges are said to be finding ways to simplify the derivatives market and make it more client-friendly, safe, and secure.
Conclusion
While we cannot ignore the advantages of derivatives in the crypto market, it is essential to exercise caution. The U.S. Securities and Exchange Commission (SEC) has been very closely monitoring crypto exchanges. It is recommended to understand the various intricacies of crypto futures and other such contracts and get the necessary permissions before offering trading in the futures and options crypto market.
If you are planning to integrate derivatives trading into your crypto exchange, Antier can help. Backed by a team of seasoned blockchain developers and technical prowess, we offer mission-driven cryptocurrency exchange software development services to our clients globally.
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Originally published at https://yourstory.com on May 22, 2020.
