Futures contracts or trading represents the advanced, high-stakes side of the cryptocurrency market. It allows traders to speculate on the future price of digital assets without actually owning the underlying coins, using leverage to amplify both potential profits and losses.
Platforms like SunCrypto have made this powerful tool accessible to Indian investors by offering high leverage (up to 75x) across a vast number of pairs, often settled in INR, removing the previous hurdles of mandatory stablecoin conversion.
What is a cryptocurrency futures contracts?
A cryptocurrency futures contract is a financial derivative—a binding agreement between two parties to buy or sell a specific cryptocurrency at a predetermined price at a specified time in the future.
The value of the futures contract derives from the price of the underlying asset (like Bitcoin or Ethereum).
- Perpetual Futures: The most common type of crypto futures (and what is typically offered on SunCrypto) are perpetual contracts. Unlike traditional futures, they have no expiration date. They use a mechanism called a “funding rate” to keep the contract price closely aligned with the spot market price.
- Cash Settlement: In crypto futures, settlement is typically done in cash (or stablecoins/INR). At the close of a position, the parties exchange the difference between the contract price and the market price, rather than physically delivering the actual cryptocurrency.
How to Engage in Futures Contracts?
Futures trading on SunCrypto utilizes leverage and allows for speculation in both rising and falling markets.
1. Leverage and Margin
This is the defining feature of futures trading.
- Leverage: It allows a trader to control a large contract value with a relatively small amount of capital, known as the Margin. For example, with 75x leverage offered by SunCrypto, you can control a ₹75,000 position using only ₹1,000 of your own margin.
- Margin: The collateral (in INR or USDT) you deposit into your futures account to open and maintain a position.
2. Going Long vs. Going Short
Futures allow you to profit regardless of the market direction:
- Going Long (Buy): You believe the price of the asset (e.g., BTC) will increase in the future.
- Going Short (Sell): You believe the price of the asset (e.g., BTC) will decrease. You profit from the decline by selling the contract first, with the intention of buying it back later at a lower price.
3. Execution on SunCrypto
- Fund Futures Wallet: Transfer INR or USDT to your dedicated futures trading wallet on SunCrypto. The platform offers INR-based futures, simplifying the process for Indian traders.
- Select Pair and Leverage: Choose your trading pair (e.g., BTC/INR) and the desired leverage (e.g., 10x, 25x, 75x). Start low if you are a beginner.
- Order Placement: Place a Limit or Market order, specifying the contract size and whether you are going Long or Short.
- Risk Management: Immediately set a Stop Loss (SL) order to automatically limit your maximum potential loss and a Take Profit (TP) order to automatically lock in your gains.
Risks of Futures Contracts
Due to the use of leverage, futures trading is significantly riskier than standard spot trading. It is not suitable for beginners without a clear risk management strategy.
1. Liquidation Risk
This is the single greatest risk. When a trade goes against your position, the market moves toward your initial margin. If the losses eat up your margin, the exchange will automatically and forcefully close your position to prevent your balance from going negative. This process is called liquidation, and it results in the total loss of the margin (collateral) dedicated to that specific trade.
- High Leverage = High Liquidation Risk: Higher leverage means even a small, sudden price swing against your position can trigger liquidation. For example, at 50x leverage, a mere 2% price drop in a Long position can lead to liquidation.
2. High Volatility
Cryptocurrency prices are notoriously volatile. This volatility, when combined with high leverage, means profits or losses can occur in a matter of seconds, demanding constant monitoring and quick decision-making.
3. Funding Rate Risk
For perpetual futures, a small fee called the funding rate is exchanged between long and short traders, usually every 8 hours, to keep the perpetual contract price near the spot price. Depending on market sentiment, you may have to pay this fee, which can accumulate over time and eat into your profits.
4. Over-Leveraging
The temptation to maximize profits often leads traders to use excessive leverage. This is a common mistake that guarantees rapid liquidation during minor market fluctuations. Responsible futures trading requires using leverage conservatively (e.g., starting with 5x to 10x).
5. Slippage on Execution
In highly volatile or illiquid markets, the final price at which your order (especially large orders or market orders) is executed may be different from the price you see when you place the order. This unexpected price difference is called slippage.
Note: SunCrypto provides advanced tools like Stop Loss and Isolated Margin (which limits the loss to only the margin used for a specific position) to help manage these inherent risks. Always conduct thorough research (DYOR) and practice on a demo account before risking real capital in futures trading.
Disclaimer: Crypto products & NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions.