The cryptocurrency market has significantly changed investment vehicles over the past decade, more so during the past few years following the introduction of crypto derivatives. Consequently, traditional assets like shares trading and currency forex trading have significantly lost touch among most retail investors since the growing popularity of the cryptocurrency industry. Now, crypto is rising to be arguably one of the most liquid and lucrative markets and has presented various opportunities for derivative traders to speculate on both rising and falling prices.
As crypto becomes widely accepted, the question has to be asked – are traditional assets going to make less of an appearance in a traders portfolio? If we look at traditional investments such as Gold, this precious metal has been regarded as a valuable and tradeable asset for thousands of years. Gold is considered a safe haven that many investors flock to when the global markets are in trouble. However, now it could be argued that derivative traders are looking to profit in a highly volatile market going forward.
We spoke to Eightcap’s director of operations, Marcus Fetherston, to understand his perspective on the increasing popularity of cryptocurrency and if traditional assets are going to be overtaken by digital assets. The award-winning broker, Eightcap, offers over 1000 financial instruments to its clients, including Forex, Indices, Shares, Commodities, ETFs and Cryptocurrency CFDs. The global derivatives provider has seen crypto derivatives rise to the forefront of traders’ portfolios over the recent years, and due to this, the crypto derivatives market has thrived.
“The crypto derivatives market has evolved over the past few years, and this presents plenty of market opportunities for retail traders. The crypto market undergoes frequent intraday price movements compared to traditional assets, allowing derivatives traders to make the most out of both rising and falling prices,” says Fetherston.
A Closer Look at the Cryptocurrency Derivatives Market
The crypto industry has experienced a tremendous rise in daily traded volume in the past two years. However, as there are numerous transactions made across different exchanges, smaller trades could potentially significantly impact market movements.
This is why crypto derivative traders will actively seek a provider that can offer them improved liquidity due to the large bouts of volatility in the crypto market. With Eightcap, crypto derivative trades are executed quickly and at a much lower cost than other derivative providers.
Several correlations exist between the cryptocurrency market and more traditional markets such as forex. One notable similarity is the effect macroeconomics has on financial markets. It’s been known that political and economic issues have a subsequent knock-on effect on the foreign exchange market. One example is a shift in monetary policy, such as high inflation reports and the rise of interest rates. Cryptocurrency is now also seeing fluctuations in price to reflect broader economic changes. Derivative traders are keeping a close eye on Bitcoin due to the latest statement from the FOMC. The Fed has stated that it would hold its interest rates near zero, and the central bank is fully intent on reducing its stimulus-led balance sheet by a substantial amount. Like traditional assets such as Gold and FX, the current news has crypto investors and traders on alert. Some analysts believe that Bitcoin could be an inflation hedge during macroeconomic events.
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