The forward contract and inverse contract are two common ways to trade cryptocurrency derivatives. The forward contract is more popular then inverse one while the inverse contract could bring more benefits due to its feature. Familiar with these two is important to do the cryptocurrency derivatives trading.
What is the forward contract
In finance or cryptocurrency derivatives trading, a forward contract is defined as a contract between two parties to bid or ask an asset (in our case is cryptocurrency derivatives) at a specified future time at a price agreed by both attenders on at the time when they commit the contract. The long position is the party agrees to buy the asset in the future and the short position is the party agrees to sell it respectively. The price agreed by both parties is called the delivery price, which is determined at the time the contract is effected. In cryptocurrency derivatives, the forward contract is to trade the cryptocurrency according to the quoted currency which normally is Stablecoins like USDT. The advantage of the forward contract is that individuals who own the stablecoins could trade various cryptocurrency derivatives easily and only need to manage only one type of cryptocurrency.
What is the inverse contract
The inverse contract, which has one difference but huge with the forwards one, is a contract that quoted currency is stablecoin and the base currency is your target, however, the inverse is shown that contract is settled on the base currency.
The difference between the forward contract and inverse contract
The forward contract may have more advantages such as less volume and lower risk than the inverse contract, also, the forward contract could do multiple contracts at the same time due to the contract is settled on the stablecoin, on the contrary, the inverse contact is counting on the base currency, therefore, there are fewer choices than the forward contract.