What is the impact of contango on cryptocurrency futures trading?

1 answers

• May 09, 2022 · 3 years ago
  Contango plays a significant role in cryptocurrency futures trading. When a futures contract is in contango, it means that the market expects the price of the underlying asset to increase in the future. This expectation can attract more buyers, leading to increased demand for futures contracts. As a result, the futures price can be higher than the spot price, creating a contango situation. Traders can take advantage of this by buying the underlying asset at the spot price and selling futures contracts at a higher price. However, it's important to consider the potential risks. If the price of the underlying asset does not increase as expected, traders may face losses. Additionally, maintaining long positions in futures contracts can be costly due to the need for continuous rolling. Therefore, traders should carefully assess the market conditions and consider the potential risks and opportunities associated with contango in cryptocurrency futures trading.
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