What are the main risks associated with crypto derivatives?

Crypto derivatives like futures and options carry significant risks. Leverage amplifies both gains and losses—a 10% price move can wipe out your entire deposit if using high leverage. Liquidation occurs when your position value drops below maintenance requirements, automatically closing your trade at a loss. Funding rates on perpetual futures can be expensive during volatile markets. Derivatives also involve counterparty risk if the exchange fails. Price volatility in crypto can trigger sudden liquidations. Additionally, derivatives markets are less regulated than traditional finance, offering fewer investor protections. Beginners should understand these risks thoroughly before trading derivatives, as they're primarily suited for experienced traders willing to manage complex positions carefully.