Decentral Block Post

Many traders frequently express some relatively large misconceptions about trading cryptocurrency futures, especially on derivatives exchanges outside the realm of traditional finance. The most common mistakes involve futures markets’ price decoupling, fees and the impact of liquidations on the derivatives instrument.

Let’s explore three simple mistakes and misconceptions that traders should avoid when trading crypto futures.

Derivatives contracts differ from spot trading in pricing and trading

Currently, the aggregate futures open interest in the crypto market surpasses $25 billion and retail traders and experienced fund managers use these instruments to leverage their crypto positons.

Futures contracts and other derivatives are often used to reduce risk or increase exposure and are not really meant to be used for degenerate gambling, despite this common interpretation.

Some differences in pricing and trading are usually missed in crypto derivatives contracts. For this reason, traders should at least consider these differences when venturing into futures markets. Even well-versed derivatives investors from traditional assets are prone to making mistakes, so it’s important to understand the existing peculiarities before using leverage.

Many traders frequently express some relatively large misconceptions about trading cryptocurrency futures, especially on derivatives exchanges outside the realm of traditional finance. The most common mistakes involve futures markets’ price decoupling, fees and the impact of liquidations on the derivatives instrument.

Let’s explore three simple mistakes and misconceptions that traders should avoid when trading crypto futures.

Derivatives contracts differ from spot trading in pricing and trading

Currently, the aggregate futures open interest in the crypto market surpasses $25 billion and retail traders and experienced fund managers use these instruments to leverage their crypto positons.

Futures contracts and other derivatives are often used to reduce risk or increase exposure and are not really meant to be used for degenerate gambling, despite this common interpretation.

Some differences in pricing and trading are usually missed in crypto derivatives contracts. For this reason, traders should at least consider these differences when venturing into futures markets. Even well-versed derivatives investors from traditional assets are prone to making mistakes, so it’s important to understand the existing peculiarities before using leverage.

Bitcoin (BTC) sought to overturn August resistance on Sep. 10 as whale buy-levels dictated BTC price action.

Whales provide short-term price ceiling

Data from Cointelegraph Markets Pro and TradingView showed BTC/USD hitting new multi-week highs of $21,671 on Bitstamp.

The pair capitalized on a short squeeze which began early on Sep. 9, taking it around 10% higher after plumbing the lowest levels since the end of June.

Analyzing the events, on-chain monitoring resource Whalemap noted that clusters of buy-ins by whales had effectively allowed Bitcoin to put in a floor.

$19,000 had been a high-volume zone of interest for buyers previously, and this thus remained unviolated during the visit to two-month lows.

Bitcoin (BTC) sought to overturn August resistance on Sep. 10 as whale buy-levels dictated BTC price action.

Whales provide short-term price ceiling

Data from Cointelegraph Markets Pro and TradingView showed BTC/USD hitting new multi-week highs of $21,671 on Bitstamp.

The pair capitalized on a short squeeze which began early on Sep. 9, taking it around 10% higher after plumbing the lowest levels since the end of June.

Analyzing the events, on-chain monitoring resource Whalemap noted that clusters of buy-ins by whales had effectively allowed Bitcoin to put in a floor.

$19,000 had been a high-volume zone of interest for buyers previously, and this thus remained unviolated during the visit to two-month lows.

Bitcoin (BTC) has been in a rut, and BTC’s price is likely to stay in its current downtrend. But like I mentioned last week, when nobody is talking about Bitcoin, that’s usually the best time to be buying Bitcoin. 

In the last week, the price took another tumble, dropping below $19,000 on Sept. 6 and currently, BTC bulls are struggling to flip $19,000–$20,000 back to support. Just this week, Federal Reserve Chairman Jerome Powell reiterated the Fed’s dedication to doing literally whatever it takes to combat inflation “until the job is done,” and market analysts have increased their interest rate hike predictions from 0.50 basis points to 0.75.

Basically, interest rate hikes and quantitative tightening are meant to crush consumer demand, which in turn, eventually leads to a decrease in the cost of goods and services, but we’re not there yet. Additional rate hikes plus QT are likely to push equities markets lower and given their high correlation to Bitcoin price, a further downside for BTC is the most likely outcome.

So, yeah, there’s not a strong investment thesis for Bitcoin right now from the perspective of price action and short-term gains. But what about those who have a longer investment horizon?

Let’s quickly review 3 charts that suggest investors should be buying Bitcoin.