The article compares futures and spot trading strategies in the cryptocurrency world, analyzing recent trends and their implications for investors.
HODL as a philosophy
The cryptocurrency market not only introduced new technological assets but also provided access to professional trading tools like options, futures, and derivatives. As of December 2024, Bitcoin futures trading volumes reached nearly $1.8 trillion, while spot trades were about $1.7 trillion. The futures market trend since 2019 reflects a steady increase, with a minor dip post-FTX crash in 2022. The HODL concept’s popularity parallels the growth in futures, highlighting a philosophy embraced by many investors to counter short-term volatility.
Evolution of the futures market
The futures market has been growing steadily since around 2019, with futures now serving as a tool for leveraged trading to maximize earning potential, a stark contrast to their original usage as a simple contract for future delivery. For instance, on December 19, the volume of forced closed positions in the crypto market was $1.01 billion. BitMEX data from 2018 and 2019 show users' effective leverage was between 20-30x.
Why spot trading matters
The debate between spot and futures trading reflects the difference between investment and speculation. Investors planning long-term investments in valuable assets prefer spot trading, avoiding leverage. Meanwhile, futures traders focus on price movement and volatility for quick profits. This illustrates two market participant types: conservative individuals valuing personal ownership and those embracing trends.
Choosing between futures and spot trading depends on investor goals and preferences. Despite the growth of speculation, HODL remains a solid strategy for those valuing long-term investments.
