The invisible power of the cryptocurrency market: the power of one price
In recent years, cryptocurrencies, such as Bitcoin and Ethereum, have paid great attention to the revolution of money and transactions. While many investors attract a high growth rate and speculative attraction of digital currencies, little realizes that there is an even stronger force in the game:
Futures Premium .
In this article, we are immersed in the world of cryptocurrencies and examine the deep impact of the only price on trading decisions. We examine the concept of futures premium and its role in the creation of a cryptocurrency market.
What is Futures Premium?
Futures Premium, also known as “Futures Wording”, refers to the difference between two prices: the current video of the price (price you buy or sell) and the futures price (price you would buy or sell. In other words, this is a difference between paid today Prices and prices you can get in the future.
For example, suppose you consider buying Bitcoin contracts with the end of the week. The current price of inspiration is $ 25,000, while the price of the future is $ 24,500. Futures Premium would be as follows:
$ 24,500 (Futures Price) – $ 25 000 (Spot Price) = – $ 250
In this case, $ 2,500 would pay $ 2,500 today to buy a contract, but theoretically can be sold in theory up to $ 26,000. This means that shopping at $ 25,000 would result in a return of 13.8%.
Effect of the future of premiums on a trade
Futures premium has a significant impact on trading decisions, especially the cryptocurrency market. Here are some modes:
- Speculative investment : higher prices of the future can make crypto currencies more attractive to investors seeking speculative profits. This is especially true of high volatility or when traders believe the price increases rapidly.
- risk management : In contrast, lower prices of the future may indicate that market emotions have changed and that investors are more cautious. This can lead to a reduction in buying activities and increasing pressure in sales, which can be useful for traders that limit their losses.
- Order flow : Futures premium also affects the order dynamics on the CRIPTO Currency market. If there is a significant difference between the future and the stain, it may affect the movement of the prices of each crypto currency.
The right examples
Let’s look at two real examples to illustrate the influence of Futures premium on trading decisions:
- Bitcoin : Bitcoin in 2017 reached the highest level of all time for $ 19, $ 666 before he experienced a significant correction at about $ 6,000. The expansion of the future was significant, the price difference was greater than 3400%. This increases the purchase activity and higher prices of each coin.
- Ethereum
: In March 2018. Ethereum Network has experienced a significant increase in demand as it can be used as a growing platform for decentralized applications (DAPPS). The extension of the future has increased significantly, the price difference is greater than 7000%.
Conclusion
The concept of futures premium is often neglected by traders and investors, but this is a fundamental consideration on the cryptocurrency market. Understanding that this phenomenon affects trading decisions, individuals can make more well -designed investment decisions and potentially profit from the complex dynamics of the game.
As the cryptocurrency market continues to develop, it is crucial for traders to be informed of the influence of futures premium and its impact on prices movement. If we acknowledge the strength of this concept, we can deeply understand the complex forces that run the market and make more deliberate decisions on trading.
