2022 has witnessed a crypto winter with all major players in the sector losing value to great extents. In the meantime, however, the popularity of crypto derivatives as a superior trading instrument has remained on an upwards trajectory. Ethereum is one of the biggest crypto assets in the markets in terms of both market cap and popularity, and so it’s only natural that derivatives having this crypto as an underlying instrument are especially in demand.
Ethereum futures are a particular kind of crypto derivative many experienced traders go for, especially those with higher risk appetites and more nuanced trading strategies. Before you consider getting into Ethereum futures trading, let’s discuss in this post what factors might impact the price of these particular derivatives.
What are Ethereum Futures?
First things first – what is a crypto derivative anyway? A crypto derivative is a financial instrument that derives its value from an underlying asset. In the case of Ethereum futures, the underlying asset is Ethereum, of course.
Ethereum futures are crypto derivatives that allow traders to speculate on the future price of Ethereum. These Ethereum derivatives are contracts that allow traders to buy or sell a specific amount of Ethereum at a predetermined price at a future date. Ethereum futures are traded on exchanges, such as Delta Exchange. They allow traders to take long or short positions on Ethereum, depending on whether they believe the price will go up or down.
Factors that affect the price of Ethereum Futures
There are several factors that can affect the price of Ethereum futures:
- Market demand: As with any asset, the price of Ethereum perpetual futures is largely driven by supply and demand. If there is strong demand for Ethereum, the price may increase. On the other hand, if there is weak demand, the price may decrease.
- Market conditions: Market conditions, including the overall state of the cryptocurrency market and the level of market volatility, can also impact the price of Ethereum futures.
- Regulatory environment: Changes in the global regulatory environment regarding crypto, such as new laws or regulations that affect the use or trading of Ethereum, can also impact the price of Ethereum futures.
- News and media: News and media coverage can impact the price of Ethereum futures as well. If there is positive news or media coverage about Ethereum, it may drive up the price of Ethereum futures. On the other hand, negative news or media coverage may have the opposite effect.
- Economic factors: Economic factors, such as changes in interest rates, inflation, and GDP growth, can also impact the price of Ethereum futures, just as they impact every other crypto asset and even other asset classes.
- Competition: The presence of other cryptocurrencies or alternative investment options can impact the price of Ethereum futures. If there are other attractive investment options available, it may decrease demand for Ethereum, which may lead to a decline in the trading volumes and price of Ethereum futures.
- Technical analysis: Technical analysis, which involves using statistical patterns and indicators to analyze the price and volume of Ethereum, can be used to predict price movements. Technical analysts may use tools such as trend lines, moving averages, and oscillators to make their predictions and trade on the basis of those predictions, directly affecting the price of Ethereum.
Benefits of trading Ethereum Futures
So now you know what factors might be affecting the price of Ethereum futures. Why should you still trade the crypto derivative? Let’s take a look at the advantages:
- Risk management: Ethereum futures allow traders to manage their risk by locking in a price for Ethereum at a future date. This can be useful for traders who want to hedge their positions in the spot market or protect their investments against unexpected price movements.
- Leverage: Ethereum futures can be traded with leverage, which means that traders can control a large position with a small amount of capital. This can allow traders to potentially generate larger profits, but it also carries the risk of larger losses.
- Speculation: Ethereum futures allow traders to speculate on the future price of Ethereum without actually having to own the underlying asset. This can be useful for traders who want to take advantage of price movements in the Ethereum market without the risk of holding a physical asset.
- Exposure to the Ethereum market: Ethereum futures can be used by investors as a way to gain exposure to the Ethereum market without having to buy and hold the actual cryptocurrency. This can be especially useful for investors who are interested in the potential growth of Ethereum but are hesitant to hold a volatile asset like a cryptocurrency.
- Liquidity: Ethereum futures have a much bigger market compared to most other crypto derivatives tools, which means they have higher trading volumes. Therefore, Ethereum futures allow traders to easily enter and exit positions.
To sum it all up, Ethereum futures provide several unique benefits for traders. They allow traders to hedge their positions and manage their risk by locking in a price for Ethereum at a future date. They also allow traders to speculate on the price of Ethereum without actually having to own the underlying asset. This can be useful for traders who want to take advantage of price movements in the Ethereum market without the risk of holding a physical asset.
However, you must still keep the aforementioned factors impacting the price of Ethereum futures in mind to optimize your trading strategies. What’s more, for an Ethereum futures trader, choosing the right exchange should be the first and foremost priority. If you are interested in trading Ethereum futures in India, give our website a visit today to find out how!