0
⭐ Features
70 views

Global Markets Rocky, BTC Futures Calm — What’s Difference Between the Two?

  • Darryn Pollock
    ⭐ Features

    Bitcoin futures have reached record lows in their volatility stakes, but what exactly is the difference between a crypto future and a regular one?

Global Markets Rocky, BTC Futures Calm — What’s Difference Between the Two?
Cover image via u.today
Contents

If ever there was a ‘flippining’ in the cryptocurrency markets, it has to be the volatility. Once known for its incredible price swings, Bitcoin has become a model asset that is breaking records with its calmness.

So much so that even products based off of the formerly volatile asset are following its trend. Bitcoin futures have reached record calmness, according to CBOE analysis, and this is with the backdrop of a rocky and quite volatile traditional market.

For this reason, it is probably a good time to delve into what differentiates Bitcoin futures from traditional asset futures, other than the product on which they are based. If Bitcoin and its features are hitting bouts of such calmness, perhaps, it can be explained in comparing the product to that of other future contracts.

Understanding futures

A futures contract is something that has long been a part of the traditional marketplace. Simply put, it can be thought of as a predefined agreement made between two parties that have mutually agreed to buy or sell a particular commodity or even currency at a pre-established price — as well as a set time in the future.

Investors enjoy futures contracts as they offer protection from price volatility and sudden shifts in the value of the asset, commodity, or currency. It thus becomes relevant why CBOE and CME raced to be the first institutionalized financial services to offer these contracts on the then highly volatile Bitcoin. It would enable investors to have their cake and eat it, too.

How futures apply to Bitcoin

Because Bitcoin can be seen as a currency or as an asset, it is easy to apply the futures financial product to it. A Bitcoin futures contract will always be linked to the trading price of Bitcoin — a principle that will apply to any other futures option as well, be it a stock, currency, asset, or commodity.

Both traditional and Bitcoin futures use the concept of leveraging, enabling the investor to not have to own the entire amount of capital in order to take a certain position in the market. It is because of this leveraging that the risk is mitigated, be it Bitcoin or any other asset.

Where do traditional market and Bitcoin part ways?

Really, on the face of it, there should be no differences between a Bitcoin future and that of the traditional markets as they are simply financial products based on different assets. However, the asset in question in terms of Bitcoin futures is something that has never really been seen before.

The youthfulness of Bitcoin as an asset that can be traded with futures contracts leaves the investor with a very short trading history. The price data available only stretches back a few years, and even still, it is highly irregular.

Cryptocurrencies really do not follow the path of any macroeconomic indicators and are setting their own precedents in terms of price fluctuations as they go along. Thus, trying to predict and prophesize on the movement of Bitcoin is extremely difficult.

This goes back to the ‘flippining’ in volatility. When CBOE and CME launched their futures, Bitcoin was surging rapidly to $20,000, and then it fell just as dramatically in huge waves of volatility. Now, the cryptocurrency is more stable than some of the biggest stocks, and that could never have been predicted.   

Another core difference lies in the fact that nearly all traditional futures make use of fiat, hard or financial assets as collateral. However, in the case of crypto, investors first need to convert their holdings into fiat, then post them as collateral.

Much of the same

The idea behind Bitcoin futures being launched by traditional future offers like CBOE and CME was to entice investors with a tool they know and understand. And for the most part, there is no tangible difference for a traditional investor; in fact, the assurance of less risk opens the door to the previously volatile market.

But, operating these futures contracts are not as easy as other assets where traditional investors would be well versed, and thus it is important to note that there may well be some give and take before traditional investors master this new area.

Subscribe to U.Today on Twitter,and get involved in all top daily crypto news, stories and price predictions!

About the author

Darryn Pollock is an award winning  journalist from Durban, South Africa. He picked up Vodacom’s Regional Sports Journalist Award in 2017 while expanding his Blockchain and cryptocurrency reach.  He is a contributor to Forbes, Cointelegraph, Binary District, and of course, U.Today. Darryn’s belief is that Blockchain technology will be the driving force of the next technological wave and it is the obligation of journalists and writers to tell its emerging story with integrity and pride.

👓 Recommended articles
0
📰 News
194 views

Ripple's XRP Is in for ‘Explosive Growth’, Prominent Venture Investor Tim Draper Says

  • Yuri Molchan
    📰 News

    A Bitcoin bull and investment guru Tim Draper predicts the calm before the storm for the XRP price, as “to call Ripple developers actions wrong is impossible”

Ripple's XRP Is in for ‘Explosive Growth’, Prominent Venture Investor Tim Draper Says
Cover image via en.wikipedia.org

Disclaimer: The opinion expressed here is not investment advice – it is provided for informational purposes only. It does not necessarily reflect the opinion of U.Today. Every investment and all trading involves risk, so you should always perform your own research prior to making decisions. We do not recommend investing money you cannot afford to lose.

Contents

When asking a question about when XRP is going to hit its quickest high profits in the quora.com forum, a user gets a reply from Tim Draper himself, who says that the XRP price is about to experience an ‘explosive growth’.

Tim Draper is pumping XRP

Tim Draper, a prominent venture investor and a Bitcoin bull, seems to be excited by the current Ripple expansion. Judging by his words, he is predicting the XRP to soar in the short term, calling it the calm before the storm or ‘explosive growth’, putting it a different way.

Tim Draper says:

“Looking at the three-time growth of Bitcoin over the past 5 months, one would expect a similar result from XRP.”

XRP should have already grown beyond $0.6 or even $0.9 by now, says the crypto investor, when talking about the results of recent Ripple’s expansions and the partnerships the crypto unicorn has initiated lately.

“The company is actively developing, expanding the sphere of influence, enlisting the support of large financial institutions and constantly improving the technology of transfers.”

Finally, he states:

“In addition, Ripple is owned by SBI, a large corporation with companies such as R3. Everything indicates that the current situation, only the calm before the storm, in our case, before the explosive growth.”

👉MUST READ

Ripple Opens New Office in the Heart of Washington, DC, to Educate US Lawmakers

Ripple Opens New Office in the Heart of Washington, DC, to Educate US Lawmakers

Ripple expands to Washington, D.C.

Previously, U.Today reported that the crypto giant has decided to expand its presence to Washington, D.C., to be closer to regulators, as per the CEO Brad Garlinghouse, and educate them on crypto and the blockchain.

He stated to Forbes:

“We’re focused on maintaining a dialogue with Washington regulators and policymakers and being a resource to the Hill allows us to be easily accessible at all times.”

Apart from extending its arms to Washington, Ripple has joined the Blockchain Association.

 

What is your bet on the price moves XRP is going to take in the near future? Share your view in the comments section below!

In this Telegram channel you’ll find fresh news, interviews, infographics, forecasts & other helpful stuff. Join U.Today's channel.

About the author

Yuri is a journalist interested in technology and technical innovations. He has been in crypto since 2017. Believes that blockchain and cryptocurrencies have a potential to transform the world in the future. ‘Hodls’ cryptocurrencies. Has written for several crypto media. Currently is a news writer at U.Today.

👓 Recommended articles

This site uses cookies for different purposes. Please set your preferences in Cookie Settings and visit our Cookie policy for more information on how and why cookies are used on this site. Click here for cookie policy

Cookie settings