Bitcoin is not a new concept anymore. It has created a buzz in the financial market due to its unprecedented price growth, with its value witnessing a 240% jump in 2020, offering investors a greater return than other traditional investment options. But, the story of BTC has not ended here, it’s price is still surging. In fact, a lot of market analysts have predicted that its value could hit over $135,000 by 2030.
Have you missed the chance to invest in this valuable asset? Does the surging price of BTC prohibit you from investing in this digital asset? If yes, then we have another option that you can use to take advantage of the growing price of BTC by investing even a little. Instead of investing in Bitcoin in India, you can invest in Bitcoin futures. Do you know what it is and how it can help in getting an outstanding return by investing a little? Continue reading this blog to know about it in detail.
What is Bitcoin Futures?
Bitcoin futures allow traders or investors to gain exposure to Bitcoin without having to hold the underlying cryptocurrency. Investing in Bitcoin futures is similar to how one trades in futures on traditional exchanges like NSE (National Stock Exchange) and BSE (Bombay Stock Exchange). Unlike in the spot market where one buys or sells BTC at its current price for instant delivery, in futures trading, people usually analyze the performance of the market and based on that analysis they buy and sell a futures contract at a predetermined price and date.
In this way, Bitcoin futures enables savvy investors to leverage BTC’s volatility without holding any. This is an ideal investment option for large-scale investment firms and those who want to take advantage of this proliferating market while avoiding the risk of investing in an unregulated market.
Though the bitcoin futures market has been around for just two years, many people are preferring it over bitcoin for all good reasons. Continue reading to know some of the major advantages of investing in BTC futures.
You can Book a Bigger Profit with Little Investment
As the Bitcoin price is soaring above $35K, one needs to have a good amount of money to own this popular digital asset. Those who are interested to invest in this currency also hesitate to invest such a huge amount of money due to the highly volatile nature of the cryptocurrency market. However, Bitcoin futures allow investors to take advantage of the surging price of bitcoin by investing just 5 to 10% of the total value of the bitcoin.
Most of the exchanges offer leverage or initial margin in between 5 to 10% to allow investors to book bigger profits in this highly volatile crypto market with little investment.
Shorting is another reason why people love to invest in bitcoin futures. It is an investment strategy where an investor enters into a trade with an aim to book a bigger profit from a drop in the market value of the underlying asset. As price settlement is done on a regular basis in the futures market, investors or traders can short futures by repurchasing their contracts at a lower price. However, you should also keep in mind that large scale shorting can put negative pressure on the market value of the asset.
Another advantage of bitcoin futures is that they are settled in cash. This simply means that no actual bitcoin trading occurred while buying and selling a futures contract. In fact, the investors, as well as the exchange, never own any BTC during the transaction. This means that bitcoin futures investors do not need to own a bitcoin wallet to enter into a futures contract.
Here is a step by step guide to investing in Bitcoin futures.
- Look for a reliable crypto trading platform
Not all cryptocurrency exchanges or trading platforms offer futures trading services. The very first step that you have to take to trade bitcoin futures is to find a crypto trading platform that suits your style of trading. A user specific cryptocurrency exchange may vary depending on the investors’ crypto investment plans, geographical locations, and even the services and contracts offered by the exchange.
Most of the cryptocurrency exchanges that offer futures trading service enable users to take advantage of the leverage offered by them to buy any futures contract. PCEX Member is the only cryptocurrency exchange in India that works on the NSE and BSE business model and enables investors to buy futures contracts in lot sizes using the lowest margin rates.
- Create a valid account and prepare it for trading
Once you are done with the selection, you have to get yourself registered. Just follow the exchange’s account setup process to get yourself registered on the trading platform. Once done, complete the KYC process to activate your account for trading. As a trader, you have to deposit some funds in your account to buy any futures contract. Most of the exchanges these days enable you to make deposits via bank transfer, UPI, and wire transfers. Some of the exchanges also enable you to buy futures contracts using other crypto assets.
- Understand the contract
There are many futures contracts available to buy and sell. Before buying one, you should look at each and every aspect like how many quantities of underlying assets are covered in a lot, the minimum margin required, expiry date along with how the market is moving to make a smart investment decision for booking a bigger profit.
Hope, now you have a clear idea about how to invest in Bitcoin Futures. If you feel confident and are ready to invest in it, you should visit PCEX Member, one of the leading cryptocurrency exchanges in India to have a great futures trading experience.