On the crypto market: why derivatives are changing the game for traders

Market volatility in cryptocurrencies is like a storm for some and a golden vein for others. This is where derivatives become a weapon in the arsenal of experienced market players. But what exactly lies behind this term?

When the underlying asset controls the fate of the instrument

Derivatives are not just numbers on a screen. They are financial contracts whose value dances in sync with the real asset. Take BTC: when the king of crypto chess grows or falls, derivatives follow it like a loyal dog.

Today, BTC is trading at $87.23K with a decrease of 2.76% over the day. Such fluctuations are bread and butter for those who understand derivative instruments.

The three pillars on which the derivatives market stands

Futures — are agreements for future delivery. You bet on where the price will be tomorrow, next month, or next year. It’s like taking a loan on volatility.

Options — a game of possibilities. You pay for the right, but not the obligation, to buy or sell at a predetermined price. It’s a safety cushion for the cautious.

Swaps — a dance of exchange. Two participants exchange cash flows based on different conditions. This is a more complex choreography, but the profit can also be more substantial.

Why it’s difficult but attractive

Derivatives provide the opportunity to play on price fluctuations, earn when the asset falls, and increase profits using leverage. But it’s not a lottery for beginners. It’s a tool that requires not just understanding, but deep market analysis, technical skills, and psychological readiness.

The risk here is not a guest but the host. Without knowledge, derivatives can wipe out your capital faster than BTC drops by 10%. That’s why this world of conquest and demise remains the privilege of those who have learned the rules of the game.