Crypto Futures Trading. Where are the profits coming from?
Hey everyone,
I am trading crypto futures (perpetual trading) on Binance… Something came to my mind and I was thinking… I know it might be a silly question but if you all could help me that would be great.
My question is: Where is the money (USDT) from trading futures coming from. Let’s say I open my LONG position on BTC/USDT pair, use 10X leverage and i put 100$ onto it.
So my position is worth 1000$. if the bitcoin price moves for let’s say 1% and I’m 10% in profit so (10$) would just like to know where that 10$ came from? Is it from other traders that just went short and are now losing money? Because that is like in the spot market but in the futures markets you don’t move the price like in the spot market where if you sell, you have a little effect on the price obviously if you have a large amount but how is it in perpetual markets? Could somebody explain, if you can how is this working? Is the USDT printing just from thin air?
The money in futures trading on Binance comes from other traders who are on the opposite side of your trade. In your example, if you open a long position with 10x leverage and 100$ worth of BTC, and you make a profit of 10$, that money comes from traders who took a short position and lost money. The profit and loss in futures trading are settled in USDT, which is a stablecoin pegged to the US dollar. The supply of USDT is not just created from thin air, it is issued and backed by Tether Limited, a company that holds US dollars in reserve to maintain the value of USDT.
When you win money, you’re taking it from others who are losing the equivalent of that money. That’s how trading works; it’s a zero sum game. In order for you to win, someone has to lose.
You’re always matched with an opposite trade.
Not really from “other traders” on the opposite side, as some have mentioned here… that would be the Spot market. You’re talking about leveraged positions on Futures market, which is more like a casino. Meaning, the ‘house’ banks on most clients losing, due to margin calls on over-leveraged positions. Very few will actually profit and cash out. So the house can easily cover the withdrawals on their balance sheet.
It’s value, it’s not about your position.
If u short coin, the longs pay you, or if u long then shorts pay.
Good question!