Guide to Bitcoin Futures

Guide to Bitcoin Futures

Although the idea of futures has been floating around, the concept is pretty new in the cryptocurrency arena. Bitcoin futures came to be in 2017 and are still a hot topic. Here, we’ll analyze the way Bitcoin futures operate and the ongoing state of the marketplace.

How do cryptocurrency futures work?

Futures are financial tradeable assets that let investors purchase or sell assets such as BTC at a preset price on a future date. When the time arrives, irrespective of the marketplace price of the moment. The key objective here is for investors to lessen marketplace risks as much as possible. A futures exchange or smart contract oversees the transfer.

  • Long position: Purchase of an instrument when the contract ends.
  • Short position: Sale of an asset when the contract ends.

Now let’s take one instance of how this works.

Let us say Gwen initiates $1K of long Bitcoin futures contract with Exchange X for a timeframe of three months. This is crucial to both sides since Gwen can save a max of $1K while still getting the number of cryptos she wished for.

Whatever happens, Gwen and X are secured from the BTC marketplace’s instability with both the long and the short positions.

Another way for investors to leverage a futures contract is through calculated speculation. For instance, if BTC’s pricing falls to $5K tomorrow, there’s every chance that it can rise to $10K again in 4 months. In this instance, investors can position their bets under a futures contract.

How CME BTC futures operate?

Bitcoin futures were released by the Chicago Board of Options Exchange (CBOE) and the Chicago Mercantile Exchange (CME) in December 2017. There are a couple of particular benefits to trading in CME futures:

  • The contracts traded here shall be supervised by the Commodity Futures Trading Commission or CFTC. Big and credible financial entities like these usually offer users more confidence in their investments.
  • This means that you do not need to own a BTC wallet to participate in this, and it’ll always have high liquidity.

Details of the contract provided by CME

  • 5 Bitcoin contract units as defined in the CME CF BTC Reference Rate.
  • Price quote just in American dollars.
  • Hours of trading: 6-5 p.m. between Sunday and Friday.
  • Contracts are listed for 6 straight months and 2 additional Decembers.
  • Contracts are financed.

What effect will Bitcoin futures have on price

The renewed interest is frequently followed by a jump in the price of the instrument.

  • BTC jumped by 10 percent to $16,936 just one day following CBOE launching futures trading.
  • BTC passed an all-time high of $20K in the run-up to the launch of BTC’s CME futures.

There are factors that influence this price increase outside of renewed investor interest:

  • Due to the high liquidity, it is considerably easier to purchase and sell digital gold.
  • BTC futures trading options are made available to investors in nations where the instrument was banned (because no BTC is actually transferred).
  • Future contracts let investors compensate for the risks of instability.

Where are Bitcoin futures traded?

  • CBOE, CME, BitMEX, Kraken, Benchmark, BitFlyer, Coinflex, BaseFEX, OKcoin, Bakkt

Final Word

BTC futures are a great method to gain from the digital coin marketplace. The greatest thing about futures trading is that you do not have to be tech-savvy to conduct such trades. No need for downloading wallets and dealing with public addresses and private keys to gain from your trades. On the other side, if you are a seasoned BTC trader, you may begin trading in any of the exchanges we listed above.