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Does Derivative Trading Constitute Any Risk to Retail Crypto Investors?

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The crucial question has arisen as to how protocols make sure retail crypto investors are making the right choices with derivative trading.

Statistics have shown that there is an almost steady rise in crypto users engaging in derivatives decentralized exchanges (DEXs) as a result of stifling regulations in China and the United States. Investors venturing into derivatives trading and decentralized exchanges have also increased their stakes. Bitcoin whales are moving in massively, and they are buying interests in derivative contracts.

The daily transactional volume of derivative protocols has thus been increased by this, paving the way for them to take over a centralized finance space like Coinbase for a short period. This quickly gained the interest of retail investors as far as going into derivatives trading in decentralized finance (Defi) was concerned. The first risk factor, however, is that in the absence of the right introductions into derivatives in decentralized finance, inexperienced investors will possibly pull out of derivatives trading as fast as they get into it.

Are DEXs Derivatives Worth the Risk?  

The derivatives in the decentralized finance sector do not have the inefficiencies of the traditional finance system, but it brings in good rewards. Nevertheless, the digital assets market has been very volatile of late, not to mention the attached difficulty in trading derivatives on decentralized exchanges, where investors need to learn to trade for themselves.

These new investors will have the need for knowledge and guidance on decentralized finance and how to navigate decentralized exchange platforms when they go into derivatives trading.

Early users of decentralized platforms in 2020 may have a feeling that their user experience is obsolete in comparison to their likes in the centralized exchanges. As a means of onboarding a new set of users, specifically those who have utilized centralized exchanges, the design of the protocols now needs to concentrate on the user experience and the simplicity of the product.

To usher new investors into the protocol, they are allowed space with which to learn about and understand the program, which will encourage them to keep using the platform.

For an average user, derivative exchanges may just be tools to reach specific objectives. It could be to access leverage or to hedge one’s current position. Derivative protocol developers are hence, to provide definite explanations of what the user interface entails and the risks users should expect in trading derivatives.

Derivatives Trading Redefined by Defi 

A lot of new derivatives investors do not have expertise in decentralized finance, and for that, new protocols set up more seamless onboarding experiences for investors such that they are not completely unequipped to handle transactions. Learning about derivatives trading is now a lot easier as there are a lot of materials and aid on social media.

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