Cryptocurrency is becoming a more and more popular investment, and Bitcoin is leading the way. Throughout 2020, Bitcoin's price has seen an unprecedented surge which has caused experts to suggest further rallies until at least 2021. One thing that has added fuel to Bitcoin's rise is the growth of derivatives in the space, particularly futures and options that allow market participants to speculate on the price of BTC.

When derivatives were first introduced to the Bitcoin market, traders had to purchase these digital assets with spot prices, meaning that any fluctuations in price had an immediate effect on the value of the derivative. This has since changed, with the amount of derivative trading around Bitcoin growing exponentially. As a result, larger market participants have engaged in a process called hedging which allows them to speculate on the future price of BTC without having to worry about the current market.

Through hedging, market participants have opened up a wider range of opportunities for investors, allowing them to take positions that will benefit them regardless of which direction the Bitcoin price moves. This has had a positive effect on the price of Bitcoin as more traders become confident in the long-term potential of cryptocurrencies. This can be seen in the fact that the price of Bitcoin is currently above the $27,000 mark and is rapidly approaching the psychologically significant $30,000 mark, with some experts suggesting that it could reach as high as $60,000 by the end of 2021.

The increased popularity of derivatives is also creating a system of oversight in the cryptocurrency market, as more market participants use derivatives to speculate on the price of Bitcoin. This has had a positive effect on the market as it reduces volatility and allows investors to better plan their decisions. Furthermore, it provides an additional layer of security, as these derivatives are more regulated than spot prices and can provide more protection to traders.

In conclusion, Bitcoin’s price rally has been given an additional boost by the growth of derivatives in the market. Derivative trading around BTC has opened up a range of new opportunities for investors, allowing them to hedge their positions and take stronger positions on future price movement. Furthermore, this has resulted in better market oversight as it reduces volatility, provides a layer of security for traders and generally creates a more stable environment for investing in Bitcoin. All of this points to further price growth for Bitcoin in 2021, with experts predicting that the price could reach as high as $60,000.



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