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PrimeBit is the most convenient way to start crypto derivatives trading anytime, anywhere. Derivative instruments are very popular to trade these days because of ease and flexibility. Virtually anyone can be a trader. But how does derivatives trading work? And how does it differ from the traditional spot trading? Knowing the difference is vital to gain success in the cryptocurrency trading field.
Two main terms are common in the crypto trading world:
Spot trading is considered as the most basic form of investment in the world of cryptocurrencies. It involves buying a cryptocurrency like Bitcoin and then holding it until its value rises. You are free to trade any of the cryptocurrencies that you have against the US dollar or other currencies at any time based on the market trends or based on your trading strategies.
The coin that you bought is your own and can be stored in your crypto wallet (or in trading platforms) for safekeeping until such time that you sell them when the price surges. You can also use it to buy altcoins (or other cryptocurrencies other than Bitcoin) that you think will rise in value in the future. Because you are buying or selling actual crypto, which is limited in supply, traders can trade with low levels of leverage. In spot trading, you can use the crypto anyway you want since it is yours.
Spot Trading Benefits
Derivatives trading is also referred to as trading of contracts. It is different in some ways from spot trading in that you will not need to own the asset and store it directly before you can trade it. Instead, you trade contracts derived from this asset using trading platforms or brokers. Derivatives trading is convenient because traders will not worry about the security of coins but still earn from their price actions. Owning crypto wallets entails security issues and additional fees.
When trading derivatives like Bitcoin contracts (or BTCUSD), you are not buying or selling actual Bitcoins. However, the value of these Bitcoin contracts follows the market price of Bitcoin against the US dollar. As the Bitcoin price rises or falls so does the value of the contract. You profit from the difference in the price changes from the moment that you opened a position (buy or sell) to the time that you closed it. A unique element of derivatives trading is that traders can easily sell “short,” which means that you can earn both from a rising and a falling market.
Derivatives come with higher levels of leverage. Trading on leverage or margin means that you can borrow funds from your broker to trade in bigger amounts or trade multiple currencies than you normally could. It is a great way to diversify a trading portfolio. How does it work? For example, when you trade Bitcoin contracts worth $10 with 10x leverage, you can buy a Bitcoin contract worth $100 with only that initial $10 as margin. Thus, there are greater profit opportunities for traders of derivative instruments.
Derivatives Trading Benefits
Both spot trading and derivatives trading have their benefits and give the traders opportunities to profit. However, most traders nowadays prefer derivatives trading because the trading conditions are much more favorable. There is no need to own the asset being traded and the fees involved are very low compared with spot trading. Due to the higher leverage offered, derivatives trading is very attractive to many traders.
PrimeBit is a derivatives exchange where traders can trade crypto contracts on Bitcoin, Ethereum, and Litecoin with up to 200x leverage. Trade anytime on mobile or desktop. Want to check out our platform? Sign up today and get a complimentary demo account where you can look around and trade with zero risk. If you’re a competitive trader, try your skills in our PrimeBit Demo Trading Contest! You won’t have to deposit anything. Just trade on your demo account, earn big, and you can win from the $5000 prize pool. Check PrimeBit now!
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\This post has been written by Hedgehog, a MCS influencer and a Bitcoin margin trader.*
#Be_a_Trader!Greetings from MCS, the derivatives trading platform where traders ALWAYS come first.
If you are a trader who mainly deals spot trading in cryptocurrency (Bitcoin, Ethereum, etc.), and a trader who has been doing cryptocurrency trading for a long time, the word "perpetual contract" might be new to you. A Perpetual Contract, one of the cryptocurrency derivatives products, is a combination of the advantages of cryptocurrency spot trading and futures trading in a traditional financial market. In this post, let's take a closer look at the perpetual contract of the most famous cryptocurrency in the world, Bitcoin.
Bitcoin perpetual contract, a Bitcoin derivative, has mainly four characteristics. There are no expiration or settlement dates, and they often use a dual pricing model. In addition, Bitcoin perpetual contract can be traded using leverage. MCS offers up to 100x leverage. Bitcoin perpetual contact also employs "Auto-Deleveraging" (ADL) as a loss minimization mechanism.
"Expiration / Settlement Date" ... "Dual Price Model" ... "Loss Minimization Mechanism"..⁉️
You might find perpetual contract difficult because you are not accustomed to these words; however, it is NOT‼️
🎯 First, Bitcoin perpetual contract has "no expiration or settlement date".
There is no expiration or settlement date for Bitcoin perpetual contract. Unlike Bitcoin spot trading that needs immediate settlement and other Bitcoin futures products, Bitcoin perpetual contract traders do not need to consider rollover cost, which is a transaction fee for a contract extension, and can sell the contract whenever. In addition, the price of MCS Bitcoin perpetual contract converges to the spot market price of Bitcoin (or market average price) through the funding rate, which takes place in every 8 hours. Thus, even though there is no expiration date, traders check this funding fee to make sure their positions are safe.
🎯 Second, Bitcoin Perpetual Contract uses "Mark Price System (Dual Price Model)".
The MCS cryptocurrency derivatives trading platform uses a mechanism called 'Funding' to link the price of Bitcoin perpetual contract to the price of the Bitcoin spot. In addition, MCS adopted a dual price model that utilizes the mark price (market average) to protect traders from unreasonable forced liquidation caused by market manipulation and to create a fair trading environment. The above-mentioned market manipulation means that it causes abnormal price fluctuations and unnecessary forced liquidation of positions, resulting in an unfair trading environment. The mark price of MCS is the real-time price average of the global Bitcoin exchanges with BTC/USDT markets.
🎯 Third, Bitcoin Perpetual Contract offers up to 100x leverage
Traders on the MCS Bitcoin Derivatives Trading Platform can trade Bitcoin perpetual contract using up to 100 times the leverage on MCS. Compared to the 3x to 20x leverage offered in spot margin trading or futures trading on other existing exchanges, MCS offers a much wider range of leverage. As a result, traders can manage their portfolio in a variety of ways, and can easily adjust the leverage and margins of open positions at any time to effectively manage risk.
🎯 Fourth, MCS Bitcoin Perpetual Contract employs "Auto-Delveraging" mechanism.
In the case of Bitcoin derivatives trading, if a trader is forced to liquidate, contract loss may occur due to the inability to settle the position at a price that is better than its bankruptcy price. In this case, the Insurance Fund covers the loss incurred. If the contract loss is not covered by the Insurance Fund, auto-deleveraging takes place. Auto-Deleveraging (ADL) is a mechanism by which a trader with high profits and leverage compensates for the contract loss. The positions of traders that are subject to ADL are automatically liquidated by matching the bankruptcy price of the position forcibly liquidated. Let me dig a bit deeper. There are two types of loss minimization mechanism; the socialized loss and the auto-deleveraging which is used by MCS. In the case of the socialized loss, all the traders on the platform compensate equally for a contract loss. Auto-deleveraging adopted by MCS affects only the traders who have profiting positions with high leverage. This protects other traders who use low risk and low leverage from being harmed by a single risky trader.
💡 "If you know your enemies and know yourself, you will not be imperiled in a hundred battles."I hope this post was helpful to you in understanding Bitcoin perpetual contract, and I really wish that you realize your financial freedom through Bitcoin perpetual contract!!
I am a Bitcoin margin trader, Hedgehog. Thank you for reading this post.
🔸 MCS Trading Platform: https://mycoinstory.com
🔸 MCS Official Telegram: https://t.me/mycoinstory_EN
🔸 MCS Official KakaoTalk : https://open.kakao.com/o/gFn4Hl7b (Password : 0615)
Traders ALWAYS come first on MCS.
MCS Official Twitter (EN): https://twitter.com/mycoinstory_mcs MCS Official Facebook: https://www.facebook.com/MyCoinStory.official
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Bitcoin Price (BTC USD): Get all information on the Bitcoin to US-Dollar Exchange Rate including Charts, News and Realtime Price. Bitcoin Price Approaching $14,000 by This Year-End, Source: Bloomberg. Mike complements his above call by illustrating how institutional investor-focused Grayscale Bitcoin Trust(GBTC) will keep on buying more BTC until it’s stash size reaches 500,000. This is a significant forecast from GBTC’s previous trend. Bitcoin Price (BTC). Price chart, trade volume, market cap, and more. Discover new cryptocurrencies to add to your portfolio. About Bitcoin. Bitcoin price today is $10,595.82 USD with a 24-hour trading volume of $50,556,435,247 USD. Bitcoin is down 1.36% in the last 24 hours. The current CoinMarketCap ranking is #1, with a market cap of $196,126,817,695 USD. Market capitalization (often shortened to market cap) is the approximate total value of a cryptocurrency, typically shown in US dollars. The market cap of a cryptocurrency is calculated by multiplying the number of coins or tokens in existence by its current price.
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