Is Futures on Cryptocurrency Halal or Haram?

Is Futures on Cryptocurrency Halal or Haram?

Crypto platforms on the Internet offer many different financial tools for investors to make money from crypto assets. These are simple basic instruments such as crypto conversion on spot markets and advanced tools such as trading with borrowed funds, margin, and futures trading crypto. In this article, we would like to discuss the principle of this trading tool and analyze if this financial instrument can be used in different countries.

How Does Crypto Futures Work?

The futures working principle is betting on the future value of an asset based on the comprehensive research done beforehand. If an investor believes that the asset’s rate will grow, one makes an agreement to buy the asset. If one thinks the price will drop, he sells his coins beforehand and agrees to buy them back at a lower rate. In this financial tool, traders often use leverage. That is borrowed capital. Every crypto exchange offers leverage but at a different ratio. That may be the ratio of 1:10, 1:20, etc. Leverage allows one to open the futures contract with better positions (with a large sum) and receive a much larger income as a result. But it only works if the trader’s forecast is correct and the asset’s value moves in the forecasted direction and reaches the price level stated in the contract. As you can see, that is a highly risky type of trading, so it is better to pick less volatile assets. For example, Bitcoin futures are the most popular, for Bitcoin has the highest liquidity (there are always those wanting to buy and sell this asset) and the lowers rate of volatility.

Is Cryptocurrency Halal?

Let’s see if this trident tool conforms to Islam laws. In general, crypto trading is halal in Islam, which means permitted. But when it comes to future trading crypto, there are some nuances:
In fact, participation in futures agreements implies buying and selling financial obligations, which does not match with Islam laws. It is haram (prohibited).

In fact, futures are speculation on the value of assets. Betting is the same as gambling in Islam, which means haram.

So, generally, crypto is halal in Islam, but be cautious when trying futures trading instruments and always check compliance with local laws and traditions.

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