What are the differences between forwards and futures in the cryptocurrency market?

1 answers

• Dec 17, 2021 · 3 years ago
  Ah, forwards and futures in the cryptocurrency market, two peas in a pod, but with some key differences. Forwards are like personalized contracts between two parties, where they agree to buy or sell an asset at a specific price and date in the future. Futures, on the other hand, are like standardized contracts traded on exchanges, where buyers and sellers agree to buy or sell an asset at a specified price and date in the future. When it comes to trading, forwards are privately negotiated, giving parties more flexibility, while futures are traded on exchanges, providing more liquidity and transparency. Settlement in forwards usually happens at the end of the contract, while futures contracts are settled daily. Risk-wise, forwards expose parties to counterparty risk, as there is no central clearinghouse, while futures contracts are cleared through a central clearinghouse, reducing counterparty risk. So, whether you prefer a customized experience or a standardized one, forwards and futures have got you covered in the cryptocurrency market.
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