First Bitcoin Futures Contract (Part 2)

The first establishment of a future contract in the history of Bitcoin was a very big milestone in this sector. I have explained about the background of this creation in my last Post. First of all we need to know about the future contracts in detail so that we can relate it with Bitcoin and other financial tools. Today I would like to explain in detail about the future contract and how this contract basically works.

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A futures contract is a legal agreement to buy or sell an asset at a predetermined price at a specific time in the future. These contracts are standard in commodities trading (think oil, gold, or wheat). This is very popular in the business world as they have some time leg to export or import their items. This is a wonderful opportunity for the traders to speculate on the future price of an asset or hedge against future price fluctuations. Let's give an example on the case of Bitcoin futures. If a trader believes Bitcoin's price will rise, they can purchase a futures contract, locking in a lower price. If the price does indeed rise by the time the contract expires, they make a profit.

Conversely, if the price falls, they incur a loss. Futures provide a way for traders to profit from Bitcoin's price movements without owning the underlying asset, which is important when dealing with an asset as volatile as Bitcoin. This kind of hedging technique can stabilize the future demand of any businessman or traders. The number of coins in the future can be ensured so that they can do their payment on the specified time in the future. In the next post I shall try to move on to this groundbreaking event straightforwardly.

~ Regards,

VEIGO (Community Mod)