unprecedented force behind the cryptocurrency market: the power of one price
In recent years, crypto currencies like Bitcoin and Ethereum have attracted significant attention for their potential to revolutionize the way we think about money and transactions. While many investors are attracted to the high rates of the growth of these digital currencies and speculative attraction, few realize that there is an even stronger force in the game:
Futures Premium
.
In this article, we will enter the world of cryptic currency and explore that one price can have a deep impact on trading decisions. We will explore the concept of futures premium and its role in the design of the CRIPTO currency market.
What is the future premium?
Futures Premium, also known as “Futures Word”, refers to the difference between two prices: the current spot price (the price you buy or sell) and the futures price (the price at which you would buy or sell the contract for delivery). In other words, this is a difference between the price you pay today and the price you could get in the future.
For example, let’s just say you are thinking about buying a bitcoin contract with a period of maturity from one week. The current knowledge price is $ 25,000, while Futures price is $ 24,500. Futures Premium would be:
$ 24,500 (Futures Price) – $ 25 000 (Spot Price) = – $ 250
In this case, you would pay $ 2,500 to buy a contract today, but theoretically, it could be sold for up to $ 26,000 a week. This means that your purchase at a price of $ 25,000 would receive $ 13.8% of investment return.
Impact of the Future Premium on Trading
Futures premium has a significant impact on trading decisions, especially on the cryptocurrency market. Here are some ways in which it works:
- Speculative investment : higher prices of the future can make cryptocurrencies more attractive to investors seeking speculative gains. This is especially true of the time of high volatility or when merchants believe that the price will increase quickly.
- risk management
: In contrast, the lower prices of the future may indicate that the market mood has changed and that investors become more cautious. This can lead to a reduction in the activity of shopping and increasing sales pressure, which can be useful for merchants who want to limit their losses.
- Order flow : Futures premium also affects the dynamics of the order of order of the cryptocurrency market. When there is a significant difference between the prices of the future and a video of the price, it can affect the movement of the prices of individual crypto currency.
Examples in the real world
In order to illustrate the influence of Futures premium on trading decisions, let’s consider two real world examples:
- Bitcoin : During 2017. Bitcoin reached the highest maximum of $ 19, $ 666 before he experienced a significant correction at about $ 6,000. The prevalence of the future was significant, with a price difference of over 3,400%. This has led to an increased purchase and higher prices activity for individual coins.
- Ethereum : In March 2018. The Ethereum network has experienced a significant increase in demand due to increasing use as a platform for decentralized applications (DAPPS). The future spread significantly, with a price difference of over 7000%.
Conclusion
The concept of futures premium is often overlooked by traders and investors, but this is an essential aspect of the cryptocurrency market. Understanding how this phenomenon affects trading decisions, individuals can make a more influential selection of investment and potentially profit from the complex dynamics in the game.
As the cryptocurrency market continues to develop, it is crucial that traders are informed of the futures premium and its influence on the movement of prices. Recognizing the strength of this concept, we can gain a deeper understanding of the intricate forces that run the market and make more deliberately traded decisions.
