Crypto derivatives: a new way to trade digital assets

Crypto derivatives: a new way to trade digital assets

Crypto derivatives have started making their impact in the world of cryptocurrency trading with their vast array of options providing new ways to trade digital assets. The market is highly volatile and the traditional buying and selling of cryptocurrencies such as Bitcoin or Ethereum may not be everyone’s cup of tea. Crypto derivatives offer an alternative for investors, allowing them to hedge risk and make profits through trading the futures, options, and other financial products.

What are crypto derivatives?

A derivative is a financial instrument that derives its value from an underlying asset. Crypto derivatives work on similar principles, using digital assets like Bitcoin, Ethereum and other cryptocurrencies as underlying assets.

Crypto derivatives are financial products, whose value is based on an underlying cryptocurrency asset. These derivative contracts can be traded on various cryptocurrency derivative platforms such as BitMEX, OkEx, Deribit, and many others.

The most common crypto derivatives are futures and options. In the case of futures, the contract contains an agreement to buy or sell an underlying asset at an agreed price, on a specific future date. Meanwhile, options enable traders to buy or sell at a specific price, but give them a right, not an obligation to execute the deal.

Why are crypto derivatives important?

Crypto derivatives play a critical role in providing hedging and risk management tools for investors in the volatile cryptocurrency markets. Derivatives of cryptocurrencies also help create transparency, liquidity and a fair pricing mechanism for the digital asset as it becomes easier to predict the underlying asset’s value in the future.

Another advantage of trading derivatives is that it allows investors to profit from a decline in prices, as opposed to only making profits when prices rise, which is the case when simply buying and holding cryptocurrency.

FAQs on Crypto Derivatives

Q: Why should I trade cryptocurrency derivatives?
A: Crypto derivatives offer a more advanced, efficient, and technologically-inclined platform for investors to trade and benefit from ever-increasing market value changes. Crypto derivatives can also provide an opportunity to hedge risks, create a diverse portfolio and improve your risk management strategy.

Q: Is trading crypto derivatives risky?
A: Yes. Cryptocurrency derivative contracts are risky, and losing large sums of money on trading them is possible. However, by managing risk with competitive strategies, investors can reduce their exposure to unforeseeable price movements.

Q: Can I trade crypto derivatives without understanding cryptocurrency trading?
A: Cryptocurrency derivatives are one part of the broader cryptocurrency market. As per traditional markets, grasping the basics of how the market operates is essential before exploring different investment options. Hence, a comprehension of cryptocurrency trading is necessary before stepping up into the world of crypto derivatives.

Q: What are the benefits of trading crypto derivatives?
A: Trading crypto derivatives offers benefits such as risk management, market prediction, and diversification of personal investments.

Q: How can I get started with trading crypto derivatives?
A: First, learn the basics of cryptocurrency and its marketplace. Once familiar with the concept, sign up for a cryptocurrency derivative trading platform, select the desired contract type, and follow instructions for buying and selling orders.


Crypto derivatives offer a new way for investors to trade cryptocurrency beyond just buying and holding. While they can be risky, they can also provide a valuable tool for risk management and diversification of investment portfolios. It is critical to understand the market and seek professional assistance before embarking on crypto derivative trading.

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