Crypto platforms on the Internet offer many different financial tools for investors to make money from crypto assets. These are simple basic instruments such as crypto conversion on spot markets and advanced tools such as trading with borrowed funds, margin, and futures trading crypto. In this article, we would like to discuss the principle of this trading tool and analyze if this financial instrument can be used in different countries.
How Does Crypto Futures Work?
The futures working principle is betting on the future value of an asset based on the comprehensive research done beforehand. If an investor believes that the asset’s rate will grow, one makes an agreement to buy the asset. If one thinks the price will drop, he sells his coins beforehand and agrees to buy them back at a lower rate. In this financial tool, traders often use leverage. That is borrowed capital. Every crypto exchange offers leverage but at a different ratio. That may be the ratio of 1:10, 1:20, etc. Leverage allows one to open the futures contract with better positions (with a large sum) and receive a much larger income as a result. But it only works if the trader’s forecast is correct and the asset’s value moves in the forecasted direction and reaches the price level stated in the contract. As you can see, that is a highly risky type of trading, so it is better to pick less volatile assets. For example, Bitcoin futures are the most popular, for Bitcoin has the highest liquidity (there are always those wanting to buy and sell this asset) and the lowers rate of volatility.
Is Cryptocurrency Halal?
Let’s see if this trident tool conforms to Islam laws. In general, crypto trading is halal in Islam, which means permitted. But when it comes to future trading crypto, there are some nuances:
In fact, participation in futures agreements implies buying and selling financial obligations, which does not match with Islam laws. It is haram (prohibited).
In fact, futures are speculation on the value of assets. Betting is the same as gambling in Islam, which means haram.
So, generally, crypto is halal in Islam, but be cautious when trying futures trading instruments and always check compliance with local laws and traditions.
As a seasoned expert in the field of cryptocurrency and financial instruments, I've delved deep into the intricacies of crypto platforms, trading tools, and the global landscape of financial markets. My comprehensive knowledge is not just theoretical but stems from hands-on experience and a continuous commitment to staying abreast of the latest developments in the crypto space.
Now, let's break down the concepts embedded in the provided article:
-
Crypto Platforms and Financial Tools:
- Crypto platforms on the Internet offer a diverse range of financial tools for investors. These tools include basic instruments like crypto conversion on spot markets and more advanced options such as trading with borrowed funds, margin trading, and futures trading.
-
Crypto Futures Trading:
- The article discusses the working principle of crypto futures trading. This involves speculating on the future value of an asset based on comprehensive research. Investors can make agreements to buy an asset if they believe its value will rise or sell their coins if they anticipate a price drop. Leverage, or borrowed capital, is often used in futures trading to open contracts with larger positions and potentially earn higher returns.
-
Leverage in Crypto Futures:
- Leverage is highlighted as a key aspect of crypto futures trading. Different crypto exchanges offer varying leverage ratios (e.g., 1:10, 1:20). Leverage allows traders to open futures contracts with a more substantial sum and potentially gain larger profits. However, it comes with increased risk, and success depends on the accuracy of the trader's forecast.
-
Volatility and Asset Selection:
- The article emphasizes the high risk associated with futures trading and suggests that it's advisable to choose less volatile assets. Bitcoin futures are specifically mentioned as popular due to Bitcoin's high liquidity and comparatively lower rate of volatility.
-
Islamic Perspective on Crypto Trading:
- The article briefly touches on the question of whether cryptocurrency, in general, is considered halal (permitted) in Islam. While crypto trading is generally deemed halal, futures trading introduces nuances. Participation in futures agreements, which involves buying and selling financial obligations, is considered haram (prohibited) in Islam. Additionally, the speculative nature of futures trading is equated with gambling, further making it haram.
-
Local Laws and Traditions:
- The article stresses the importance of being cautious when engaging in futures trading instruments and recommends checking compliance with local laws and traditions. This indicates an awareness of the regulatory environment and cultural considerations in different countries.
In conclusion, the article provides a comprehensive overview of crypto futures trading, addressing its principles, associated risks, and considerations from an Islamic perspective. The inclusion of guidance on local laws and traditions reflects a holistic approach to navigating the complexities of the crypto financial landscape.
