How do financial instruments like futures and options contribute to hedging in the cryptocurrency market?

1 answers

• Nov 30, 2021 · 3 years ago
  In the cryptocurrency market, financial instruments like futures and options are used for hedging purposes to manage risk. Futures contracts allow traders to lock in a specific price for buying or selling a cryptocurrency at a future date. This helps protect against price fluctuations and provides a level of certainty in an otherwise volatile market. Options, on the other hand, provide traders with the right, but not the obligation, to buy or sell a cryptocurrency at a predetermined price within a specific timeframe. This allows traders to hedge their positions and limit potential losses. By using these financial instruments, traders can effectively manage risk and protect their investments in the cryptocurrency market.
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