As we all know, due to the continuous development of digital currency, people’s investment and demand for digital currency are also increasing. In order to meet these needs of investors, digital currency exchanges have also launched many different types of digital assets. investment services. Generally, novices will start to understand and invest in digital currencies from spot trading, because spot trading is the easiest way to invest, and in addition to spot trading, contract trading, that is, futures trading, is also very popular. It can Invest without holding digital currency. Many investors still don’t know what is the difference between digital currency contracts and spot? Let me tell you about it below.
What is the difference between a digital currency contract and a spot?
The biggest difference between the digital currency contract and the spot is the difference in the trading mechanism. Compared with the spot, the trading mechanism of the contract is the two-way trading mechanism of leveraged margin. Leverage means multiplying your profits and losses. Margin is the use of a portion of the funds in your account as collateral to trade an amount that you cannot even trade yourself. The two-way transaction is better understood. You can either buy long when it goes up or sell short when it goes down.
The most important thing is leverage. Many friends say that the contract is much more risky than the spot. It is also here. Leverage is a geometric multiple to amplify your profits and losses, which is more stringent for the risk control ability of many investors. From my personal point of view, risk itself is not leverage, but exists in the investor’s own perception and control of risk. .
Digital currency contract risk
1. It is difficult for technology to support large-scale high-frequency quantitative trading
“It is not ruled out that some small or start-up exchanges are subjectively malicious. , but have reservations about the previous head individuals. The heads have been operating stably for many years and have a good reputation and influence. From their layout, it can be seen that they are committed to long-term development and international development. If they are subjectively evil, they are serious To hurt their own future, from the perspective of motivation, the stability of the system and the trust of investors can maximize their interests, so subjectively unplugging the network cable is not worth the loss.” Senior industry observers told Chain Finance.
2. The risk control rules are not yet perfect, and the exchange is still trying and making mistakes.
The above-mentioned exchange person said that the market is developing, and the contract rules of the exchange are constantly improving and improving. optimization. The rules of any field are from imperfect to perfect, and the digital currency field is no exception.
“The rules are definitely not perfect at this stage, and exchanges must constantly revise the rules to find a balance between retail investors and institutional investors. The original intention of the contract design is to encourage investors to keep chasing the market. Sell and maintain high liquidity. The purpose of the exchange is not only to ensure the liquidity of transactions, but also to restrict some behaviors that may disrupt the market through rules.” The person added.
3. The threshold is too low to prevent non-qualified investors from entering the market
“In the futures market, the number distribution of institutional investors and retail investors is 2:8, that is, the vast majority of Most of them are retail investors. And there are very few restrictions on the entry of these retail investors. This also makes it difficult for many investors to have a rational mentality and a professional investment foundation.” The aforementioned exchange person said helplessly.
“In the digital currency market, investors’ mentality and professionalism are extremely immature, and the high-yield and high-loss characteristics of futures and leverage are amplifying the problem.”
“As a qualified investor, you should have your own understanding of the digital currency spot, your own opinions on the market conditions, and sufficient market judgment ability. The futures contracts of digital assets are now derivatives in alternative investments. Investors need to The asset allocation of this type of product is appropriately reduced, and it has a certain risk tolerance.”
All the above content is a specific elaboration on the difference between digital currency contracts and spot. In fact, the reason why digital currency contracts can be so popular in the market must have its value. When many exchanges launch futures trading, they will repeatedly remind investors that bitcoin futures can make bitcoin long-term. Price fluctuations become smoother, and it can become a risk management tool for investors in the currency circle, but we still want to be alert to the risks of contract transactions as mentioned above.