Why do big companies make money on crypto currency do you know how they do it
Trading futures on cryptocurrency using institutional strategies involves adopting a disciplined, risk-managed approach to capitalize on market volatility while minimizing potential losses. Here are key strategies to consider:
1. **Trend Following**: Institutional traders often employ trend-following strategies, using tools like moving averages, RSI, or MACD to identify and follow the prevailing market direction. This helps to align positions with the broader market momentum, increasing the probability of success.
2. **Risk Management**: Institutions prioritize risk management, setting stop-loss orders and using position sizing techniques to control exposure. A common method is the Kelly Criterion, which adjusts the size of each trade based on the trader’s confidence level and the risk-to-reward ratio.
3. **Arbitrage**: With the crypto market often having discrepancies in pricing across different exchanges, institutional traders may engage in arbitrage. This involves exploiting price differences between futures contracts and spot markets, buying at a lower price and selling at a higher price for risk-free profits.
4. **Market Sentiment Analysis**: Monitoring news, social media, and on-chain data allows traders to gauge market sentiment. Institutional players often have access to advanced analytics tools to predict short-term price moves based on these sentiments.
5. **Hedging**: Using futures contracts to hedge against other positions can be crucial. For example, long-term crypto holders may short futures to protect their portfolios from potential downturns.
