How do future contracts differ from forward contracts in the realm of cryptocurrencies?

1 answers

• Dec 16, 2021 · 3 years ago
  When it comes to cryptocurrencies, future contracts and forward contracts have some notable differences. Future contracts are traded on regulated exchanges like Binance and BYDFi, which ensures a higher level of security and transparency. On the other hand, forward contracts are typically traded over-the-counter (OTC), which may involve more risk. Another difference is the standardization of future contracts. They have fixed contract sizes, expiration dates, and settlement terms, which makes them more easily tradable and liquid. In contrast, forward contracts can be customized to fit the specific needs of the parties involved, but this flexibility may result in less liquidity. Lastly, future contracts are marked-to-market daily, meaning that gains and losses are settled on a daily basis. Forward contracts, on the other hand, settle at the end of the contract term. Overall, future contracts offer a more regulated and standardized way to trade cryptocurrencies compared to forward contracts.
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