Futures contracts (discussed in a fun way)

TL; DR

• Futures contracts are an agreement to buy or sell an asset at a specific price at a later date; and since the value of BTC has fallen in recent months, there have been massive futures liquidations.

Full story

Let’s talk about futures contracts (but we’ll make it fun).

Futures contracts are an agreement to buy or sell an asset at a specified price at a later date.

Say Seb for example thought after reaching $73,000 last month, BTC could reach $80,000 by the 17th of this month (yesterday).

He could enter into a contract to buy BTC for $73,000, and on the 17th he could either make a great deal (making $7,000) if we were right and it would make $80,000; or he would have to pay the difference between his purchase price and the actual price.

Turns out the price of BTC on the 17th was around $61,200. Poor Seb.

(But that’s the risk you take!)

Bringing things back to the real world, thus Mint glassApproximately $220 million worth of BTC liquidations have occurred in the past day.

We are now about 2 days away from the BTC halving.

If the BTC halving is proving to be a ‘sell the news’ event, chances are we will see more price drops and more liquidations of futures contracts.

On the other hand, if the last few days have been some sort of ‘sell the news’ event, most of the major liquidations may have already taken place.

Regardless, even though the price has fluctuated, nothing has changed in BTC’s fundamentals.

So the chances of it ever reaching that high price again seem promising.

@Seb – ready to take on some futures contracts?