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  • Crypto Futures Trading with FTX

    Crypto Futures Trading with FTX

    FTX EXCHANGE (INCLUDING FTX INTERNATIONAL AND FTX.US) ARE NO LONGER IN OPERATION

    Both exchanges have filed for bankruptcy. Subsequently, the exchange was “hacked” and more than US$600 million worth of cryptocurrencies drained. The hacker is strongly rumoured to be a former FTX employee. For more about how this story unfolded and the latest news, check out these articles:

    What is futures trading?

    Newcomers to cryptocurrency and digital asset trading must navigate a complex sector filled with acronyms and technical jargon, as well as dozens of ways to trade across multiple exchanges.

    One option newcomers may have heard of, and which they may want to learn more about is futures trading. 

    At first glance, this seems like a complicated way to invest, but the team at exchanges like FTX do their best to make the process as straightforward as possible.

    What are futures?

    Futures are a type of derivative financial contract that creates an obligation for the parties to exchange the asset at a price and date that is predetermined. 

    The buyer is obliged to buy that asset, and the seller has to sell the asset, even if the price of the asset has gone up or down. 

    Think of future trading as a fixed price sale in the future. You agree with someone on a price that is higher or lower than the current price, and then in the future, the sale gets executed at the same agreed price. 

    The underlying assets in the contract can be anything from a set of cryptocurrencies to real estate or any other commodity. The contracts are designed to have a detail of the quantity of the underlying asset, and also help in the execution of the trade on a trading platform. 

    Why is it called futures trading?

    Futures are generally named by the month they expire. For example, a January gold futures contract will expire in January and is based on gold as an underlying asset. Similarly, you can also find contracts for other commodities as well. 

    Traders usually use the term futures broadly for a whole asset class. However, there are multiple futures contracts available based on different assets. These future contracts include: 

    • Commodities such as crude oil, corn, wheat, and so on
    • US bonds, or any other government-backed financial bond
    • Precious commodities like platinum and gold
    • Index futures such as the Dow Jones Industrial Index

    Examples

    A very good example of a contract available on FTX is the Donald Trump 2024 futures contract. 

    This is a contract that allows traders to ‘bet’ whether Donald Trump will return to the White House following the next presidential election in 2024. 

    The contract expires on $1 if former president Donald Trump wins the 2024 election and it expires at $0 if he loses the election. The contract specifically also specifies other scenarios in which the contract expires early, for example, if he decides not to run in the future presidential election. 

    So if anyone invests $100 right now into the contract they will get 1063 positions of the contract which may become worth $1063 if Trump wins, and if he loses the amount would become zero. 

    The leverage used by the futures market is usually high. Leverage is a process in which a buyer can purchase the contract even if they enter it with a fraction of the contract’s value. The buyer only needs to come up with a fraction of the money, while the remainder is put up by the broker. 

    One of the most important things in futures trading is the exchange, where the whole trade gets executed and settled. As futures trading also involves physical exchange, it is important to have a good exchange with a stellar reputation backing up your trade. However, it should be noted most futures contracts are for people who speculate on the trade.

    Difference between options and futures contracts

    For people who are new to futures, it is important to understand there’s a difference between futures and options. An options contract does not put an obligation on the buyer or the seller. In the American way of doing business, it gives them the right to execute the trade before the expiration time, while in Europe the right is given after the expiration time. 

    In a futures contract, the buyer has to take possession of the underlying asset, and subsequently, the seller has to sell him that asset, they can settle for the cash equivalent. However, the trade has to take place. 

    The buyer also has the option of loading off their position any time before the trade expires to get rid of their obligation. This is one thing that is common in options as well as futures trading giving an advantage to the buyer to benefit from the leverage holder’s position before expiration. 

    FTX Exchange

    Hundreds of platforms deal with crypto futures trading, however, traders need to be careful about which one they choose. They need to select a platform based on their preferences. 

    FTX has been one of the most promising entrants in the futures trading domain and has been taking up market share. The platform is slowly gaining a lot of traction and is widely considered to be one of the best platforms for futures trading. So, if you are interested in futures trading, FTX should be considered. 

    FTX was founded by Sam Bankman-Fried in 2019. He is also the founder of Alameda Research, a cryptocurrency, and blockchain research company that creates specialized algorithms for trading cryptocurrency. He is also a high-profile trader and created FTX as a trading platform that specializes in margin trading, futures trading, and leveraged trading. The exchange is backed by Binance, the biggest crypto exchange in the world, in what has been termed as a ‘strategic partnership’.

    The FTX exchange was founded due to the SBF’s quest for a crypto trading platform that had it all from a trader’s perspective. He wanted a trading platform that put traders at the heart of the experience and designed FTX to cater to trader’s every need. 

    Simplicity, security, and abundance of features were made important parts of the FTX core philosophy. Even though the exchange was designed for traders, the UI/UX was kept simple and intuitive, so novices don’t feel overburdened.

    To get started with FTX exchange, check out our FTX Exchange Guide.

    What makes FTX futures different from regular futures?

    The futures trading on FTX is a little different from other exchanges that offer futures contracts. 

    FTX futures are settled using stable coins. The settlements are made using stable coins as collateral and regular crypto cannot be used. This means that the volatility of crypto has no real effect on the users. This also gives the users a USD-based settlement exposure which means that you can use USD as the base currency for all your collateral and contracts, without the need for a bank account. Being in the crypto space also makes it easier for the position to be shifted around.

    To avoid clawbacks, FTX futures has a unique program for providing backstop liquidity. The backstop liquidity is provided to accounts that are about to go bankrupt. This prevents the exchange from clawbacks. 

    Backstop liquidity is the assistance from the exchange that helps in creating a secondary source of funds for liquidity when the primary can’t cover it, in case of a bankruptcy event. It also stops the buyer from making additional payments to the seller in the case, which are called clawbacks.

    The margin calls on the platform are measured and careful which avoids exposure to major price dislocations and huge losses.

    How to post collateral?

    In FTX futures the collateral is based upon stable coins and you do not have the option to post collateral in other cryptocurrencies. The current stable coins that are accepted include TUSD, USDC, and PAX. 

    For you to deposit or withdraw collateral you can go to your wallet on the FTX exchange and deposit USDC, PAX, or TUSD in your wallet. You can deposit them through a credit card or wallet transfer as well. 

    All margins posted on the wallet are in USD in your wallet by default, even if you fund it with stable coins the balance is shown in USD. 

    The collateral has a weight difference for each stable coin, in the case of USD fiat, the weight is kept at 1 meaning you can keep the collateral at the same amount. However for USDT, it is 0.975, for BTC it is 0.95 and for ETH it is 0.9 which means for the collateral to be high you have to have more collateral. This means that for $100 invested in USDT the collateral is at $97.5 while for the equivalent amount in  BTC it is $95.

    You can use the same collateral pool for all of your positions, by default all currencies that include USD, non-USD fiat, stable coins, and some cryptos can be counted as collateral. Cross margin is used for the account as every sub-account has its collateral wallet which is central to that account. Sub-accounts are considered as accounts and each sub-account has its own collateral. If you want isolated margins you would need to create a sub-account for each margin pool.

    How do Futures expire?

    The futures contract expires based on the set date of expiration. For example, a quarter future contract will expire every quarter between 2 am and 3 am UTC. Once the futures contract has expired the collateral amount gets credited into the seller’s account.

    What are perpetual futures?

    Perpetual futures are based on contracts that have no expiration date. The perpetual contracts work hour-wise, with each hour the contract has a funding payment.

    This has a function of keeping the price of perpetual futures according to the index which is underlining it. The price can be kept stable without the position closing down or expiring. 

    How can I trade futures?

    FTX is simple, go to the FTX website and you’ll see the registration page. Simply sign up with the email address you want to create your account with.

    Sign up for FTX
    Sign up for an FTX account

    Once you have opened an account the next thing to do is to add funds to the exchange wallet. Depositing your funds into the FTX exchange can be done either through connecting it with an existing crypto wallet or you can deposit funds directly through using a credit card or a debit card.

    Deposit to FTX
    Deposit to FTX

    Once your funds have been deposited you can go to the ‘Markets’ tab on the front page:

    FTX markets
    FTX markets

    In the ‘markets’ tab, you would get the following view, where you can see different futures contracts listed. The FTX exchange offers the largest collection of altcoins futures in the business. 

    FTX markets page
    FTX markets page

    You can also see the timed futures, for example, December expiration futures, as well as perpetual futures in the list as well. 

    The exchange also offers futures on US-based stocks and commodities as well.

    FTX US stocks and commodities futures
    FTX US stocks and commodities futures

    Once you have decided you want to trade a future, you select the future you want to trade and you get taken to the console. The console looks something like this:

    FTX trade console
    FTX trade console

    At the middle of the console you can look at the trading window which has the graphs displayed. 

    The top right corner shows you the index details as well as the price of the futures contract, along with its expiration. The bottom right shows you details of the collateral you have available, and the leverage can also be set from there as well. 


    Coming down from the console you can come to the order book as well as the order execution tab and the market trades tab:

    FTX order book
    FTX order book

    The console of the futures tab is designed with professional traders in mind; the console has each functionality that a trader would require. 

    The traders can monitor the price through the grid as well as make reference lines on the console as well. You can also add a variety of indicators to the console. The index price shows you the average of all the exchanges in the area, it also shows you different details as well.

    Below the console window, you can take a look at the current positions you have in the market as well as the previous positions you have had.

    The futures trades can be made through the console easily by keeping the collateral in your wallets. Once you have the collateral you can start trading futures through the exchange easily. 

    Conclusion

    Hopefully, this guide has given you an insight into the world of futures trading and gives you an oversight of how traders can and do use this method to make money on digital asset markets.

    FTX is a great place to trade futures and to learn more about this exciting sector of digital asset trading, offering users a simple and easy-to-understand interface.

    As with all investments, people should take care and ensure they have an appropriate trading risk mitigation strategy in place to manage their portfolios. Always make sure you never invest more than you can afford to lose. The cryptocurrency markets are by their very nature extremely volatile, with prices moving much more sharply than traditional markets, both up and down. 

    Check out our other FTX guides

    Frequently asked questions

    Are there any fees for futures trading on FTX exchange?

    FTX uses a tiered fee structure for futures trading which starts at 0.020% for maker fees and 0.070% for taker fees. Frequent traders can get discounted trading fees up to 0.00% and 0.04% for maker and taker fees respectively.

    Can you trade crypto futures as a United States resident?

    This depends on the policies of each cryptocurrency exchange, but generally, residents of the United States are not permitted to trade crypto futures. A few exceptions are the Chicago Mercantile Exchange (CME) and the Cboe Options Exchange.

    Is crypto futures trading safe?

    Trading in crypto or Bitcoin futures, or even cryptocurrency trading generally involves risks. One notable risk is the inherent volatility of cryptocurrency prices which can fluctuate greatly on a daily basis. Combined with leverage trading, this can hugely amplify any losses you may suffer if the market does not go in the way you anticipated.

    How can you mitigate risks in crypto futures trading?

    Some traders use stop-loss or take-profit levels. These will close trades that are losses or before the market trend changes. These can help traders because it works automatically, so the trader does not need to be at their computer.

    Another way to mitigate risks in crypto futures trading is avoiding emotional trading. For example, some traders feel FOMO (Fear of Missing Out) or revenge trade by “doubling down” when making a loss in an effort to minimise the loss. Emotional trading can in fact lead to further losses because it is not well thought out and researched.

    Disclaimer: Cryptocurrency trading involves significant risks and may result in the loss of your capital. You should carefully consider whether trading cryptocurrencies is right for you in light of your financial condition and ability to bear financial risks. Cryptocurrency prices are highly volatile and can fluctuate widely in a short period of time. As such, trading cryptocurrencies may not be suitable for everyone. Additionally, storing cryptocurrencies on a centralized exchange carries inherent risks, including the potential for loss due to hacking, exchange collapse, or other security breaches. We strongly advise that you seek independent professional advice before engaging in any cryptocurrency trading activities and carefully consider the security measures in place when choosing or storing your cryptocurrencies on a cryptocurrency exchange.

  • Crypto Futures Trading: What is it?

    Crypto Futures Trading: What is it?

    Crypto futures trading is a type of derivative financial contract. It creates an obligation for the parties to exchange the crypto asset at a predetermined price and date. In this article, we look at what is crypto futures trading.

    What is futures trading?

    Futures are generally named based on the month they expire. For example, a March crude oil futures contract will expire in March and is based on crude oil as an underlying asset. You can also find contracts for other commodities. 

    Traders use the term futures broadly for a whole asset class. And there are multiple futures contracts available based on different types of assets. For example: 

    • Commodities such as crude oil, corn, and wheat;
    • US bonds, or any other government-backed financial bond;
    • Precious commodities like silver and gold; and
    • Index futures such as the Dow Jones Industrial Index.

    For example, a BTCUSD quarterly contract uses BTC as an underlying asset and expires quarterly.

    What is crypto futures trading?

    In crypto futures trading, traders can gain exposure to cryptocurrencies without actually needing to possess the underlying crypto asset. However, there are risks involved with futures trading such as high price volatility.

    Traders use futures trading to take advantage and profit from market movements by going either long or short on a futures contract. Going “long” means that a trader purchases a futures contract expecting that it would increase in value in the future. On the other hand, a trader going “short” means they are hoping prices will drop.

    Here is an example of a futures contract:

    Adam enters into a long futures position when BTC was trading at US$15,000 whilst Bob enters into a short futures position. BTC prices rose to US$20,000 and both Adam and Bob agree to settle their positions. For Adam, BTC was worth more at settlement than when he entered the long position. So Adam makes a profit of US$5,000 from the exchange, being the price difference between the two times. On the other hand, Bob is holding a losing trade since he was holding a short position. So Bob must instead pay the exchange the deficit loss of US$5,000.

    Crypto futures trading
    Crypto futures trading (Source: Binance)

    Difference between options and futures contracts trading

    Futures and options contracts are not the same. An options contract does not impose an obligation on the buyer or the seller. Rather, an options contract gives the parties the option to buy or sell a crypto asset at a fixed price on a specified expiry date. There are 2 types of options contracts: call contracts which give traders the right to buy, and put options which give traders the right to sell.

    On the other hand, in a futures contract, the buyer has to take possession of the underlying asset, and the seller has to sell that asset. The parties can settle for the cash equivalent, which is what happens on most cryptocurrency exchanges. However, the trade must take place. 

    Pros of crypto futures trading

    Here are some benefits (pros) of crypto futures trading:

    • Crypto futures contracts allow traders to gain exposure to cryptocurrencies and possibly profit from their price movements without holding the cryptocurrency itself.
    • Traders can bet against the direction of the market and profit from it. Long traders predict the price of a crypto asset will increase. Whist traders which go short would profit if prices drop.
    • Trading crypto futures with leverage allows traders to potentially have more gains with only a fraction of the total cost. This, however, comes with risks.

    Cons of crypto futures trading

    Here are some risks (cons) of crypto futures trading:

    • Cryptocurrency markets can be very volatile. And unlike traditional markets, cryptocurrencies are traded 24 hours a day. This means traders must constantly check the direction of the market.
    • Leveraged trading is very risky and could lead to substantial losses.

    Conclusion

    Crypto futures trading is a good way to gain exposure to cryptocurrency trading without holding the underlying cryptocurrency. It is also a hugely popular financial product that is offered on most crypto exchanges. Traders however should take extra care and ensure they have appropriate trading risk mitigation strategies in place to manage their portfolios. You would never invest more than you can afford to lose, especially when cryptocurrency markets are by nature extremely volatile.

  • Crypto funding rates: How it works and how to earn passive income

    Crypto funding rates: How it works and how to earn passive income

    Funding rates are periodic payments by cryptocurrency exchanges to traders based on the difference between the perpetual contract market and spot prices. Depending on your standpoint, you could either stand to receive payment or be the party paying it. Many cryptocurrency traders take advantage of crypto funding rates to earn passive income. In this guide, we look at how crypto funding rates work and how you can earn passive income from them.

    What are traditional futures vs perpetual futures contracts in crypto trading?

    To understand what is a funding rate, we must first know the difference between Traditional Futures and Perpetual Futures contracts. 

    A key feature of traditional futures contracts is the expiration date. Traditional Futures contracts usually settle (expire) once a month or quarter. And when this happens, the settlement procedure begins. During this settlement period, the contract price converges with the spot price and then all open positions will expire.

    Crypto-derivative exchanges like Binance often provide Perpetual Futures contracts, which have a similar structure to Traditional Futures contracts. Perpetual contracts, on the other hand, have a significant advantage. The advantage of perpetual contracts is that they do not have an expiry date. So traders can, for example, keep a short position open indefinitely unless they are liquidated.

    Furthermore, Traditional Futures usually have a broker who will ask the trader to top up the amount accordingly based on “margin calls” i.e. the margin difference between the contract price and the spot price.

    Due to the fact that perpetual futures contracts never settle or expire, cryptocurrency exchanges require a system to ensure that futures and index prices converge on a regular basis. This is where the concept of the funding rate comes in.

    What is a Funding Rate?

    Funding rates are periodic payments to long traders, which predict the market will go up, and short traders, which foresee the market will go down. The funding rate amount is based on the difference between the perpetual contract market and spot prices. So, depending on the traders’ position, they can either stand to pay or receive the funding rate.

    When the funding rate is positive, the price of the perpetual contract is greater than the mark price. In such cases, long traders pay short traders. Conversely, the funding rate is negative when perpetual prices are below the mark price. This is when the short traders pay the long traders.

    Why do Funding Rates Exist?

    Futures contracts expire (settle) at a future date. When this happens, the futures price will meet with the current spot price. That is, the futures price is a predetermined spot price at a predetermined date in the future.

    The futures market can be in one of two states relative to the spot price:

    • Contango: The futures market is trading above the spot price; or
    • Backwardation: The futures market is trading below the spot price.

    The difference between the futures and spot market is called the “basis”.

    Whilst perpetual contracts do not expire, they still need to settle at a spot price. However, there are sometimes differences in the cryptocurrency’s prices between the spot and futures prices on an exchange. This is despite the fact that they should be in line since they need to settle against each other over time.

    Therefore, to keep the spot price and the perpetual contract prices in line, exchanges add an interest rate component (i.e. a funding rate). This funding rate incentivizes traders to take positions that help close the price gap, whilst penalizing those that do the opposite. In essence:

    • When the funding rate is positive, those who are long pay those who are short. This means those who are short will benefit. Therefore, people are incentivized to take short positions; and
    • When the funding rate is negative, those who are short pay those who are long. So if you are in a long position, you will receive the funding paid by those who are short.

    Traders try to avoid paying the “penalty” by closing their long or short positions before the funding rate expires. When traders do this, the prices between the contracts and spot prices will begin to converge.

    For example, when the contracts price is above the spot price, the funding rate is positive. In such cases, those who are long pay those who are short. Traders with long positions are encouraged to close their positions before the funding rate expires to avoid paying those with short positions. Meanwhile, traders are incentivized to open short positions because they can receive payment. The effect of this is that the contracts price will be pushed down and the gap between that and the spot price will be closed.

    On the other hand, when the contract price is below the spot price, the funding rate is negative. Shorts will pay the longs. Therefore, traders with short positions will try and close their positions to avoid payment and open long positions to receive payment. Thus, the contract price will be increased to meet the spot price.

    What is the Purpose of Funding Rates?

    The purpose of funding rates is to prevent continued divergence in the perpetual contract market and the spot price for a cryptocurrency. And since prices of cryptocurrencies are consistently fluctuating, the funding rate has to be recalculated periodically. For example, some exchanges like Binance will recalculate their funding rates every 8 hours.

    How to Make Money and Earn Passive Income from Funding Rates

    One tip to make some “passive income” from funding rates is to buy AND short the exact same amount of the cryptocurrency you put your money on. 

    This method balances the positive and negative funding rates, where technically you do not have a position in that particular cryptocurrency market since it is counterbalanced. 

    However, your short trading will get paid on an hourly basis. So, you can get “passive income” on the side, even though overall it mostly turns out to be net value since you have the positive trades too. 

    A lot of large trading firms use this defunding method to get large sums of money quickly. 

    Conclusion

    Crypto funding rates are an integral feature of the perpetual futures market Most cryptocurrency exchanges use funding rates to ensure that contract prices are always in line with spot prices. In turn, traders can benefit from taking advantage of funding rates to earn some passive income with funding fees.

    To learn more about how to profit from funding rates on different exchanges, check out these articles:

  • Secrets of “Darkpools” and unreported trade volume and Bitcoin OTC

    Secrets of “Darkpools” and unreported trade volume and Bitcoin OTC

    In Crypto, not all trade volumes are visible – in fact “Darkpools” account for a huge amount of crypto trading and has an enormous impact on cryptocurrency prices. Darkpools include peer-to-peer trading, such as on sites like localbitcoins.com and also Over the Counter (OTC) desks. The reason why it’s unreported is because deals are done privately, for example Peer-to-peer trading can be done in person and with cash, leaving virtually no trace of the transaction ever happening. Large volumes are also traded OTC – this is more organised as private buyers and sellers are matched, with some form of escrow to allow the transaction to take place. OTC desk sometimes even require minimum volumes, like $100,000+ USD to up to 1 Million.

    First things first. What’s an Over the Counter (OTC) desk?

    Traditionally, OTC desks facilitate trading of securities that are not listed on formal exchanges, e.g. the New York Stock Exchange.

    The trading of cryptocurrencies on OTC desks is similar to those in traditional markets.

    OTC desks have a network of buyers and sellers. The trades themselves are facilitated by OTC broker-dealer who will locate and negotiate directly with prospective buyers and sellers over computer networks or by phone.

    This is contrasted from trading over exchanges where the prices and order books are publicly available. For OTC desks, their broker-dealers will negotiate the trade price for you. Trades are also not publicly listed giving the parties privacy.

    Therefore, to fully understand what is going on in the cryptocurrency markets it is important to consider what is also happening at OTC desks. This is because large transactions happen on them on a daily basis.

    What does a trader at an OTC desk do?

    Traders at OTC desks are the broker-dealers mentioned above. Their role is to locate and match buyers and sellers, and negotiate the best deal for all the parties involved.

    Part 1: Crypto trading/ Market Manipulation/ OTC Markets

    Therefore, it is important for traders at OTC desks to have a keen eye on the cryptocurrency markets and be knowledgable of the market trends.

    I had the opportunity to interview Charles Yang, Head Trader at Genesis Block Hong Kong, an OTC desk. In my interviews we discuss what’s really happening at OTC desks away from the public eye. We also discuss his thoughts on the market sentiment.


    Is Tether Safe? Will Bitcoin & Ethereum Recover? 

    Secrets and Insights from an OTC Trader

    Here’s a summary of the key points from the interviews with Charles.

    There is still interest in cryptocurrencies

    Charles observes there is revived interest in cryptocurrencies despite this bear market.

    He notes that a lot of the customers from the OTC desk who were previously dormant have recently contacted them wanting to buy and sell cryptocurrencies.

    The risk of Tether is exaggerated

    Firstly, what is Tether? Refresh your memory with our Tether Explained guide below:

    We’ve seen in recent news that USDT is not fully backed by cash. Instead, Tether is around 75% backed by cash, and the remaining 25% by other securities or loans.

    Confused with what’s happening in this Tether scandal? Check out our video below which explains what is happening and the latest legal action surrounding Bitfinex.

    Despite this, there is still demand for USDT in Asian countries such as China, where they are buying USDT at a premium.

    This is because China bans cryptocurrency exchanges, so retail investors cannot buy cryptocurrencies such as BTC. What they do instead is they first buy USDT through peer to peer merchants, and then enter the cryptocurrency market at a later time when conditions are right. 

    Right now, Bitfinex who is being accused of “losing” customers funds is more at risk. Bitfinex will have to go bust first before people question USDT.

    Charles believes that fundamentally short trading would have less losses because if USDT is at 97% and your prediction is wrong, then your loss would only be 3%. Whereas the opposite would be to bet that it goes to 0.

    Mining is still profitable

    The recent “official news” in China was that cryptocurrency mining has been banned.

    Despite this ban, Bitmain is coming up with new models and generally summer is big for mining because electric costs falls.

    There may be miners who start accumulating and building to maximize their margins 

    Charles notes there is news that big players are scrambling to get cheap damaged mining rigs. They are not the newest models but there are still returns from using them to mine cryptocurrencies.

    So despite the official news about China banning mining the word on the street is that people are buying rigs and locking in contracts for the summer months.

    Simple guide to the aftermath of the Chinese Bitcoin mining ban

    Initial Exchange Offerings (IEOs) are risky, but need not be avoided completely

    If you participate and get allocation you would benefit. But ultimately it is the exchanges that benefit because you need to buy their token to participate.

    For example Binance requires you to buy into IEOs with their BNB token. Of course it’ll be great for you in the short term if you get allocation and the coin pumps. However your risk is that you would be left with the exchange token if you don’t manage to get any allocation after the lottery.

    IEOs are also highly volatile, especially immediately after listing

    It may be better to trade with OTC desks than exchanges

    Charles notices that there is quieter trade flow, so big players looking to buy or sell cryptocurrencies need to offer better prices. Therefore the margin between the buy and sell price is much less. Bigger players also can offer better quotes because of volume. Therefore it may be cheaper to trade with OTCs who deal exclusively with larger orders than exchanges.

    And whilst exchanges require you to have the funds ready at the time of transaction, OTC desks allow you to lock in the prices and settle later. This gives people more flexibility .

    However, depending on who you are, one upside or downside of OTCs is that they are not transparent. So while you can try to gauge whether there is a lot of trade flow through an OTC desk by reading their reports (if any), there is no way you can verify if they are being truthful. On the other hand you can conduct trades privately compared to on exchanges.

    What coins to hold? Bitcoin Bitcoin Bitcoin (BTC)

    Unlike other coins, Bitcoin (BTC) has a 10 year history. There is no founding team or leader. For this reason it is not affected by company politics and is the most decentralised.

    We can see the prices for a lot of tokens crash during the Initial Coin Offering (ICO) crash. Some may be due to the project running out of funds, failing to deliver on its promises or in worse cases the founders and key personnel leaving the project altogether. Studies were shown that over 80% of ICOs in 2017 were scams.

    I was standing in the same spot glued to my phone for 2 hours when this all went down.

    We also see that the ICO game was not fair, some people were able to purchase tokens for a more favourable rate or terms even before the token was listed to the public. This however would never happen with BTC.

    Is day trading profitable? No (sorry)

    For retail investors, day trading is not profitable even for traditional markets.

    This is because retail investors would be bogged down by trading fees, but not all trades are profitable.

    Retail investors are also unprotected from market manipulation. This is especially true for cryptocurrency investing, which is generally an unregulated space.

    Don’t do this

    Conclusion

    Ultimately, trading cryptocurrencies requires exercising caution and doing your own research. One can look at OTC desk reports to have a good grasp of what may be quietly happening with some big players, but at the end of the day, question everything. Also, whilst you may stand to gain several times your initial investment by going into highly volatile IEOs, bear in mind it is designed so that exchanges ultimately win. The most prudent thing to do is to never invest more than you can lose.

    Links

    Buy Bitcoin in Hong Kong – https://buybitcoinhongkong.com/