Betting Against a Cryptocurrency
In futures markets, unlike the traditional Spot market, we can trade against a cryptocurrency. That is, if it is falling in price, we can make money.
But not everything is rosy. Let's quickly understand how each type of market works:
Spot Market
The Spot market is the traditional market. You buy a cryptocurrency and become its owner. No matter how much it depreciates, you will always have that amount of the coin for the price paid. This means that the balance of your wallet will rise and fall as the price of the cryptocurrency fluctuates. You only sell at a loss if you decide to do so. This is the standard market in which most people operate, especially beginners. Here, you buy and wait for the price to rise — a simple investment logic.
Futures Market
Unlike the Spot market, where you buy the coin, in the Futures market you basically bet whether the price of the coin will rise or fall. In this market, there are contracts with a set time or perpetual contracts (which are the most used by most traders).
In the futures market, you can enter a LONG position (betting that the price will rise) or SHORT (betting that the price will fall). The “cherry on top” in the Futures market is financial leverage. This means you can operate with a larger amount than your available balance. For example, if you have 10 USDT and use 10x leverage, you will be operating with 100 USDT, as the exchange “lends” you the 90 USDT to operate. Each broker has its own funding methods.
Caution!
However, not everything is so simple. The higher the leverage, the greater the risk of liquidation. The broker will never lose money. Liquidation occurs when your margin of guarantee is exhausted. Therefore, in futures markets, the use of STOP is practically mandatory — just like in the Spot market, which can also involve risk, but with different characteristics.
If you want to know more, see the pinned post
