Cryptocurrency Derivatives Bitcoin & Altcoin Futures

Be sure to check that you have the right permissions and meet funding requirements on your account before you apply. Ether is the coin or cryptocurrency that is used inside the ethereum network. Unlike bitcoin, the ethereum network’s blockchain platform not only stores text but also stores code. This means ethereum isn’t just a cryptocurrency, but a platform that other cryptocurrencies and even applications can be built on—where ether can be used. Bitcoin is a digital currency, also known as a cryptocurrency, and is created or mined when people solve complex math puzzles online.

Person A now holds a contract worth $1000, with a margin of $100 and a loan of $900. Person A is bullish on BTC, and thus goes long on the BTC/USDT Futures contract with a 10x leverage. Learn more about Consensus 2023, CoinDesk’s longest-running and most influential event that brings together all sides of crypto, blockchain and Web3.

Understanding Cryptocurrency Futures

Although a crypto futures contract is supposed to closely track the price of the underlying asset, its value can sometimes vary throughout its maturation . This is usually caused by sudden sharp changes in volatility, which can be brought on by a fundamental catalyst such as Tesla buying up more bitcoin or a major country banning crypto. Supply and demand issues for specific contracts can lead to spreads widening or shrinking in one or more set of futures contracts compared to others. Like any type of crypto trading, crypto futures trading can be rewarding, and many trade futures contracts full-time. However, it requires time and experience to do it safely and have more gains than losses. For example, if a trader shorts two bitcoin futures contracts expiring in June, they will need to buy two bitcoin futures contracts expiring on the same date.

what are crypto futures

This time, instead of buying, the trader sells 5 futures contracts for USDt 1,000 each, totaling a position value worth USDt 5000. Following a price drop of USDt 500, the trader repurchases the original 5 contracts for a total value of USDt 2,500, keeping USDt 2,500 as profit. Crypto Futures are perpetual in nature, as mentioned earlier and thus crypto Futures cannot be allowed to deviate too much from the spot prices of the underlying asset. While a traditional futures contract can deviate significantly, and the difference caused by the deviation is settled during the expiry and the contract is settled in cash.

Crypto Futures and Options – Andrew Elder

Their conclusion may be based on fundamental analysis using some metrics or technical analysis, sometimes both, upon which they base their prediction that the asset will perform in a certain way on a particular day. The agreed time may be as short as 24 hours to as long as several years. This is often referred to as gambling because the parties involved in the transaction usually base their trades on speculation of how the asset price will perform in the future, hence the term futures trading. If you choose to buy this contract and the price of bitcoin increases to $20,000 by the contract’s expiration date, you will have realized $10,000 in profit.

what are crypto futures

CoinMarketCap Alexandria takes a look at the differences — and similarities — of crypto options and futures. Having a proper trading strategy that includes everything from entry and exit points, risk management, and max drawdowns that a trader is willing to bear – all laid out before a trade is taken. Now, the crypto Futures market has grown so much so that Bitcoin Futures alone currently has a standing open interest of over $12 billion, according to data from Coinglass. In March 2023 alone, Bitcoin Futures saw over $1.3 trillion in trading volumes across the world, across all the major exchanges offering crypto Futures services, according to data from!

Diving Deeper into Crypto Options and Futures

In this case, you could sell Ethereum at $3,000 within the following ninety days. Options have an expiry date, which sets out the point at which the contract must be fulfilled, and a strike price, which establishes the price for which the asset may be bought or sold before the option expires. In fact, the combined trading volume for Bitcoin and Ethereum options last year reached $387 billion.

Besides spot, there are other financial instruments available in the crypto market. They are essentially contracts for buying or selling an asset at a particular time in the future. Traders do not take the ownership of the underlying assets, but have a right or obligation to execute the contract. A derivative is a class of financial contracts that derive their value from the performance of an underlying entity. Derivatives where this underlying is a cryptocurrency or a cryptoasset, e.g.

What Is Futures Trading in Crypto and How Does It Work?

This feature also allows you to use futures contracts to hedge against market volatility. Among the disadvantages are high complexity for beginners to enter the futures market and high risks, especially when using leverage. Short-term fluctuations in the value of the underlying asset can lead to position derivatives in crypto liquidation and significant losses. Investors cannot benefit economically from staking, for instance, because they do not own the underlying cryptocurrency. The prominent types of cryptocurrency derivative contracts include futures, options, contracts for difference , perpetual swaps and swaps.

  • Learn more about Consensus 2023, CoinDesk’s longest-running and most influential event that brings together all sides of crypto, blockchain and Web3.
  • We’ve built in even more cryptocurrency futures trading opportunities with Bitcoin futures, Micro Bitcoin futures, Ether futures, and Micro Ether futures.
  • For easy options trading on instruments like Bitcoin options, Delta exchange is your ideal go-to choice.
  • While Bitcoin futures are supposed to make crypto trading easier and attract new money to the market, they are not readily available for anyone interested.
  • Positions are opened contrary to the spot position, that is, when there is a profit or loss in one position, it is offset by changes in the value of the other position.

With attractive fee structures, extreme flexibility when it comes to trading strategies, and the perpetual nature of crypto futures, it is built to cater every kind of investor or trader out there. The main advantage of trading Bitcoin futures contracts is that they offer regulated exposure to cryptocurrencies. In a volatile ecosystem with wild price swings, that is a significant point.

About cryptocurrency futures trading

You simply exchange your existing assets for other assets at the current market price. Therefore, to buy 1 BTC on spot market you will need exactly $20,000. At the same time, on futures market, only 10-15% of that amount is required to open a position for 1 BTC.

Are futures right for your trade plan?

Crypto options contracts provide the contract holder with the right but not the obligation to buy or sell an asset at a predefined price and date. Traders can buy call options if they think the price of Bitcoin will go up. Alternately, a put option is a bearish bet that the cryptocurrency’s price will decline. In a call option, gains may be unlimited , while the losses are limited to the premium paid for the contract. In a put option, losses may be unlimited , while the gains are limited to the premium paid for the options contract.