A financial instrument deriving its value from the value of an underlying asset.
Derivatives are extremely common and popular financial instruments. They are often used for risk hedging. If an investor knows that they want to buy an asset, they may sign a derivatives contract agreeing to buy the asset at a specific price. This helps them to hedge against potential fluctuations in the value of the asset.
Wild price fluctuations are a chance for speculators to make money, but they are also offputting to more risk-averse investors. The launch of Bitcoin futures on the Chicago Board Options Exchange was seen as a big milestone for Bitcoin as it offered institutional investors a way to hedge against those fluctuations.
Crypto derivatives are widely available on most major crypto exchanges. There are also moves towards the expansion of derivatives offerings from traditional global exchanges such as the Nasdaq.
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