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Imagine an early trader in the financial markets between the 18th and 19th centuries. During this time, traders engaged in speculative agreements that hinged on predictions. Whether it's oil, wheat, or other major commodities, traders have had to predict where prices will go in the coming weeks, months, and even years. These transactions, known as futures contracts, are agreements to exchange a commodity at a predetermined price at a predetermined date in the future.
The essence of trading during this period was not only understanding current market activity, but also anticipating potential changes over time. Futures contracts created a system that allowed forward-looking speculation and provided a mechanism for hedging against price fluctuations.
Today, traders still rely on intuition and experience to predict price movements, but they now have access to algorithms, machine learning models, and 24/7 real-time data analysis in the palm of their hands. Despite these significant technological advances, the tension between risk and reward, and the need for timely decision-making, remains central to futures trading.
Traditionally, traders have dealt with contract expiration dates and complex rollovers. Traders now have the option to hold their positions indefinitely. This is where Perpetual Futures, or “PERPS”, come into play. In crypto, persistent futures are a new breed of future contract because there is no formal end date, thus removing significant time-based complexity.
For crypto traders, perpetual futures offer more flexibility as they can enter positions as they see fit and hold them to a self-determined timeline.
However, this new flexibility does not come without challenges that hinder its use. Despite the sophistication of available crypto trading tools, successfully navigating the market often requires deep technical and strategic understanding, making it difficult to navigate even experienced traders. Presents a learning curve.
Because of this, many investors choose to stick with traditional investment strategies that have served them for decades. However, despite peaking institutional and government interest in crypto, many are wary of fully embracing the new opportunities that come with it.
This is especially true for institutions, as concerns about appropriate risk management tools and long-term trading tactics complicate the decision to actively participate in the crypto market.
So what has changed?
As the market changes, investment managers now have access to more sophisticated platforms using simplified interfaces. Powered by artificial intelligence, these platforms leverage advanced technology that helps traders create more opportunities in an easier way.
For example, recent platform integrations such as Coinbase Advanced's 3Commas allow traders to execute both perpetual and spot futures using an algorithmic approach. By offering more flexible trading capabilities, these tools help institutions navigate complex market dynamics with more precision and confidence.
The integration includes Coinbase Advanced Futures Trading, giving asset managers the ability to explore the potential of perpetual futures and test their forecasting skills. Additionally, by leveraging artificial intelligence, traders can continually refine their strategies to achieve their desired results.
The financial environment has outgrown traditional approaches. To compete in this transformation, institutions must explore alternative investment strategies and adopt tools to deliver greater desired outcomes for clients. This shift won't happen overnight, but those who have begun to integrate these changes are now ahead of the curve. Although it may seem foreign at first, adopting this gradual adaptation and being open to new forms of investment opportunities is critical to long-term success.
