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ETH · 16w

From stablecoins to futures: fixing your profits in USD

From stablecoins to futures: fixing your profits in USD OnederXBlockedUnblockFollowFollowing

Mar 19

What is a stablecoin? As follows from the name itself, it is a cryptocurrency designed to minimize price volatility, that is, ensuring a stable exchange rate.

For instance, one unit of the largest stablecoin — Tether (USDT) is set to be equal to 1 USD, and for the last three years since its entrance in the public crypto market Tether’s exchange rate has been more or less stable — meaning that it fulfils its purpose well.

At the same time, we should point out that centralized stablecoins are a subject of many well-founded concerns, since it is impossible to transparently verify that they are really backed by their underlying asset the way their creators say they are. Thus, today we will discuss an alternative to stablecoins: a less known but just as efficient hedging tool. We are talking about Bitcoin futures, which are free from most of stablecoins’ flaws, have several unique advantages, and are currently undervalued. This article sets out to shed some light at what BTC futures are and why they are worth your attention.

Futures basics

The general public knows futures contracts as a speculative instrument. However, one of their main functions is hedging: by investing in futures, one can reduce the risks of negative price volatility of the underlying asset.

Futures in the cryptoworld are basically the same thing as in any other market, with a single difference — their basic asset is Bitcoin.

Before we move forward, let’s talk a bit about what hedging means. Let’s say you already hold a certain asset or plan to buy it in the future at a certain price. If the price changes, you would get either a profit or a loss relative to what you initially spent on the asset. In order to protect yourself from the risk, you can use futures in such a way that your profit or loss will not change regardless of the future price cha...

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