Derivatives
3 major mistakes to avoid when trading crypto futures and options
Novice traders are usually drawn to futures and options markets due to the promise of high returns. These traders watch influencers post incredible gains, and at the same time, the multiple advertisements from derivatives exchanges that offer 100x leverage are at times irresistible for most. Although traders can effectively increase gains with recurring derivatives contracts, a few mistakes can quickly turn the dream of outsized gains into nightmares and an empty account. Even experienced investors in traditional markets fall victim to issues particular t cryptocurrency markets. Cryptocurrency derivatives function similarly to traditional markets because buyers and sellers enter into contracts dependent on an underlying asset. The contract cannot be transferred across different excha...
Bitcoin fails to break the $21K support, but bears remain shy
Bitcoin (BTC) rallied on the back of the United States stock market’s 3.4% gains on Oct. 28, with the S&P 500 index rising to its highest level in 44 days. In addition, recently released data showed that inflation might be slowing down, which gave investors hope that the Federal Reserve might break its pattern of 75 basis-point rate hikes after its November meeting. In September, the U.S. core personal consumption expenditures price index rose 0.5% from the previous month. Although still an increase, it was in line with expectations. This data is the Federal Reserve’s primary inflation measure for interest rate modeling. Additional positive news came from tech giant Apple, which reported weak iPhone revenues on Oct. 27 but beat Wall Street estimates for quarterly earnings and margin. M...
Here’s how Bitcoin pro traders plan to profit from BTC’s eventual pop above $20K
Bitcoin (BTC) entered an ascending channel in mid-September and has continued to trade sideways activity near $19,500. Due to the bullish nature of the technical formation and a drop in the sell pressure from troubled miners, analysts expect a price increase over the next couple of months. Bitcoin/USD price at FTX. Source: TradingView Independent analyst @el_crypto_prof noted that BTC’s price formed a “1-2-3 Reversal-Pattern” on a daily time frame, hinting that $20,000 could flip to support soon. $BTC #Bitcoin Yes, the price action of $BTC is really boring, isn’t it? But if you look closely, a textbook “1-2-3 Reversal-Pattern” has formed in the last few days, which should finally send Bitcoin above 20k soon. pic.twitter.com/29Wa64XKQa — ⓗ (@el_crypto_pro...
Here’s why Bitcoin price could tap $21K before Friday’s $510M BTC options expiry
Bitcoin (BTC) has been trying to break above the $20,500 resistance for the past 35 days, with the latest failed attempt on Oct. 6. Meanwhile, bears have displayed strength on four different occasions after BTC tested levels below $18,500 during that period. Bitcoin/USD price index, 12-hour chart. Source: TradingView Investors are still unsure whether $18,200 was really the bottom because the support level weakens each time it is tested. That is why it’s important for bulls to keep the momentum during this week’s $510 million options expiry. The Oct. 21 options expiry is especially relevant because Bitcoin bears can profit $80 million by suppressing BTC below $19,000. Bears placed their bets at $19,000 and lower The open interest for the Oct. 21 options expiry is $510 million, but the actu...
2 key Ethereum price indicators point to traders opening long positions
Ether (ETH) price has been unable to close above $1,400 for the past 29 days and it has been trading in a relatively tight $150 range. At the moment, the $1,250 support and the $1,400 resistance seem difficult to break, but two months ago, Ether was trading at $2,000. The current price range for Ether simply reflects how volatile cryptocurrencies can be. From one side, investors are calm as Ether trades 50% above the $880 intraday low on June 18. However, the price is still down 65% year-to-date despite the most exciting upgrade in the network’s sev-year history. More importantly, Ethereum’s biggest rival, BNB Chain, suffered a cross-chain security exploit on Oct. 6. The $568 million exploit caused BNB Chain to temporarily suspend all transactions on the network, which holds $5...
Bankman-Fried ‘100%’ supports knowledge tests for retail derivatives traders
The founder and CEO of cryptocurrency exchange FTX, Sam Bankman-Fried has backed the idea of knowledge tests and disclosures to protect retail investors but said it shouldn’t just be crypto-specific. Bankman-Fried tweeted his thoughts in response to an idea floated by the Commodities Future Trading Commission (CFTC) commissioner Christy Goldsmith Romero on Oct. 15, saying the establishment of a “household retail investor” category for derivatives trading could give greater consumer protections. Romero said due to crypto, more retail investors are entering the derivatives markets and called for the CFTC to separate these investors from professional and high-net-worth individuals and have “disclosures written in a way that regular people understand or could be used when weighing ru...
Bitcoin derivatives data reflects traders’ belief that $20K will become support
Bitcoin (BTC) showed strength on Oct. 4 and 5, posting a 5% gain on Oct. 5 and breaking through the $20,000 resistance. The move liquidated $75 million worth of leverage short (bear) positions and it led some traders to predict a potential rally to $28,000. $BTC #Bitcoin Shared this descending channel 2 days ago.$BTC has managed to break through the middle line.Next target = Upper channel trendline = ~21.5k. In case of a breakout, 28k-30k are possible. pic.twitter.com/dyqMLdcXZ4 — ⓗ (@el_crypto_prof) October 4, 2022 As described by Moustache, the descending channel continues to exert its pressure, but there could be enough strength to test the upper channel trendline at $21,500. The price action coincided with improving conditions for global equity markets on Oct. 4, as the S&P 50...
A crumbling stock market could create profitable opportunities for Bitcoin traders
Some of the biggest companies in the world are expected to report their 2Q earnings in October, including electric automaker Tesla on Oct. 18, tech giants Meta and Microsoft on Oct. 24, Apple and Amazon on Oct. 26 and Google on Oct. 30. Currently, the possibility of an even more severe global economic slowdown is in the cards and lackluster profits could further add to the uncertainty. Given the unprecedented nature of the United State Federal Reserve tightening and mounting macroeconomic uncertainties, investors are afraid that corporate profitability will start to deteriorate. In addition, persistent inflation continues to force businesses to cut back on hiring and adopt cost-cutting measures. Strengthening the dollar is particularly punitive for U.S. listed companies because their produ...
Long the Bitcoin bottom, or watch and wait? Bitcoin traders plan their next move
Bitcoin (BTC) faced a 9% correction in the early hours of Sept. 19 as the price traded down to $18,270. Even though the price quickly bounced back above $19,000, this level was the lowest price seen in three months. However, pro traders held their ground and were not inclined to take the loss, as measured by derivatives contracts. Bitcoin/USD price index, 2-hour. Source: TradingView Pinpointing the rationale behind the crash is extremely difficult, but some say United States President Joe Biden’s interview on CBS “60 Minutes” raised concerns about global warfare. When responding to whether U.S. forces would defend Taiwan in the event of a China-led invasion, Biden replied: “Yes, if in fact, there was an unprecedented attack.” Others cite China’s central ...
Tired of losing money? Here are 2 reasons why retail investors always lose
A quick flick through Twitter, any social media investing club, or investing-themed Reddit will quickly allow one to find handfuls of traders who have vastly excelled throughout a month, semester, or even a year. Believe it or not, most successful traders cherry-pick periods or use different accounts simultaneously to ensure there’s always a winning position to display. On the other hand, millions of traders blow up their portfolios and turn out empty-handed, especially when using leverage. Take, for example, the United Kingdom’s Financial Conduct Authority (FCA) which requires that brokers disclose the percentage of their accounts in the region that are unprofitably trading derivatives. According to the data, 69% to 84% of retail investors lose money. Similarly, a study by the U.S. ...
Volatility expected as $490M in ETH options expire shortly after the Ethereum Merge
Given the current state of the wider crypto market, some traders might be surprised to learn that Ether (ETH) has been trading in an ascending trend for the past 17 days. While the entire cryptocurrency market experienced a 10% decline on Sept. 13, Ether’s price held firm near the $1,570 support level. Ether/USD price index. Source: TradingView In less than 12 hours, the Ethereum network is scheduled to undergo its largest ever upgrade and the possibility of extreme volatility should not be ignored. The transition to a proof-of-stake network will be a game changer for multiple reasons, including a 98.5% cut in energy use and reduced coin inflation. During an upgrade, there is always the risk of multiple malfunctions, especially in more complex systems like the Ethereum Virtual Machin...
3 major mistakes to avoid when trading cryptocurrency futures markets
Many traders frequently express some relatively large misconceptions about trading cryptocurrency futures, especially on derivatives exchanges outside the realm of traditional finance. The most common mistakes involve futures markets’ price decoupling, fees and the impact of liquidations on the derivatives instrument. Let’s explore three simple mistakes and misconceptions that traders should avoid when trading crypto futures. Derivatives contracts differ from spot trading in pricing and trading Currently, the aggregate futures open interest in the crypto market surpasses $25 billion and retail traders and experienced fund managers use these instruments to leverage their crypto positons. Futures contracts and other derivatives are often used to reduce risk or increase exposure and are not r...
