Top Cryptocurrency Derivatives Exchanges by Open Interest

Making sure that you get reasonable fees is important. If you're an active trader, too high of a fee would lead to accumulative costs that make you spend extra funds. In crypto exchange, fees are usually divided between "taker" and "maker". For crypto exchanges, fees above 1% are considered costly. However, some traders may tolerate them if the exchange is backed up with a good reputation and reliability.

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Generally speaking, derivatives can be divided into two major categories: lock derivatives and option derivatives. Lock products like futures, forwards, and swaps bind both parties involved to take action based on the agreed-upon terms over the predetermined period of the contract. Thus, both parties are obliged to buy or sell the underlying asset at a specific price over a certain period. Meanwhile, options offer both parties the right to buy or sell the underlying asset at a specific price on or before the contract expires.

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Transactions involving derivatives may be subject to regulatory risks in some regions or countries in the world. 

For example, the government of Country X becomes increasingly concerned about potential risks associated with unregulated crypto derivatives trading, such as investor protection, market manipulation, and money laundering.

They decide to introduce stricter regulations to address these concerns.

The government of Country X implements new regulations that require crypto derivatives exchanges to obtain licenses, adhere to specific reporting and disclosure requirements, implement robust AML and KYC procedures, and comply with strict risk management measures.

Some exchanges may struggle to meet the requirements, leading to closures or the migration of operations to other jurisdictions with more favorable regulatory environments. The introduction of stricter regulations also deters some traders from participating in crypto derivatives markets due to concerns about increased oversight, limitations on leverage, or additional compliance requirements.

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These are some of the advantages of derivative trading:

• Hedging: Derivatives can be used to hedge the price of an open position and minimize the risks of trading.
• Leverage: You can open a bigger position size than the actual amount of capital that you have in your account.
• Lock-in price: You can speculate on the price of an asset and take advantage of the fixed price.

Continue Reading at Is Derivative Trading Profitable?