What is the definition of underlying in the context of cryptocurrencies?

3 answers

• Dec 27, 2021 · 3 years ago
  In the context of cryptocurrencies, the term 'underlying' refers to the asset or instrument on which a derivative or financial product is based. It is the fundamental asset that determines the value of the derivative. For example, in the case of Bitcoin futures, Bitcoin is the underlying asset. Understanding the underlying asset is crucial for evaluating the risk and potential returns of a derivative product.
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• Dec 27, 2021 · 3 years ago
  Think of the underlying in cryptocurrencies as the foundation or core asset that supports the value of a derivative. It's like the building blocks on which the derivative is built. Without a strong underlying asset, the derivative would have no value. So, when you hear the term 'underlying' in the context of cryptocurrencies, it's referring to the asset that the derivative is derived from.
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• Dec 27, 2021 · 3 years ago
  When it comes to cryptocurrencies, the term 'underlying' is often used to describe the original digital asset on which a derivative or financial product is based. It's like the parent asset that gives birth to other derivative products. For example, Ethereum can be the underlying asset for various decentralized finance (DeFi) projects. These projects are built on top of the Ethereum blockchain, making Ethereum the underlying asset.
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