What is a derivative?

A derivative is an asset that achieves its value by tracking the price movements of another underlying asset. In the cryptocurrency space, the current, most-popular derivatives are futures and options, both of which allow you to bet on the future prices of assets like Bitcoin or Ether and many others.

What are the major risks of crypto derivatives?

Essentially, the major risks of crypto derivatives can be summed up by saying that unless you're an experienced derivatives trader, trading in derivatives generally isn't advisable. Because most derivatives equate to bets in a regulated environment on the future movements of an asset or market, trading in them carries the risk of losing everything you've put in.

Because the crypto space is still far more of an early-stage market than the global stock, bond, or commodity markets, the risk of derivatives markets being manipulated by traders with deep pockets is also significantly higher.

How do traders use derivatives?

Traditionally, traders' main use case of derivatives is as a hedge against possible future bear markets. This refers to the fact that if one occurs, the holder of a derivative can sell its contract, which helps them to recoup any losses they might be anticipating(or have already experienced).

The article does not constitute financial advice.

Start with crypto today

Sign up on NBX, a trusted Norwegian cryptocurrency exchange and custodian, and kickstart your crypto journey safely.
Crypto 101
Explore the most popular crypto terms and find answers to your questions.

What is an altcoin?


What is MDM, EDR and configuration hardening?


Is Bitcoin legal?


What is Uniswap?


What are forks?


How much shall you invest in cryptocurrency?


What is staking?


How is blockchain secured?


What is public-key cryptography?


Insights, Trends, Analysis

Unraveling the cryptocurrency industry revolution.

Previous bull runs and hypes

Each bull run in crypto brings new projects and hype to the crypto sphere.
3 minutes

Week 46 in review: Dogecoin (Doge)

The week in review: Dogecoin (Doge) week 46 - 13th to 19th of Nov - NBX report.
2 minutes

Week 46 in review: Ethereum (ETH)

The week in review: Ethereum (ETH) week 46 - 13th to 19th of Nov - NBX report.
2 minutes
Cookie Consent

By clicking “Accept”, you agree to the storing of cookies on your device to enhance site navigation, analyze site usage, and assist in our marketing efforts. View our Privacy Policy for more information.