Bitcoin futures: what are they? Where can they be traded?

Bitcoin futures

What are bitcoin futures?

A futures contract is a type of derivative contract where two parties agree to exchange an asset, or the equivalent in cash, at a predetermined price on a future date and they are obligated to do so.

Whenever an investor buys or sells Bitcoin futures contracts, he or she is speculating about the price of Bitcoin in the future. In essence, two parties make a bet: One believes the BTC will increase in price in the future, and another bets that it will fall in price. A cash settlement is reached between the two parties. If one person gets it wrong, the other party gets paid a cash settlement.

In the global futures market, there are many types of contracts, such as currency futures, index futures, commodity futures, and insurance futures. These contracts are regulated by the Commodity Futures Trading Commission (CTFC), which considers Bitcoin a commodity and such contracts are commodity futures.

Futures contracts for bitcoin are traded on the Chicago Mercantile Exchange (CME), which introduces new cash-settled contracts every month.

In addition to monthly BTC futures contracts for six months, CME Group also offers additional quarterly BTC futures contracts for each quarter.

A monthly futures contract expires on the last Friday of the month and represents 5 BTC.

Relationship between bitcoin futures and bitcoin price 

The price of bitcoin should ultimately be tracked by bitcoin futures contracts. However, the price might vary throughout the settlement date. As a result, bitcoin futures contracts can increase or lower bitcoin’s current price (spot price). 

A rapid increase in volatility usually causes this. For instance, Tesla may invest more in bitcoin, or a major country (China) may ban crypto. As a result of supply and demand issues, bitcoin futures spreads can widen or shrink.

As a result of non-trading periods, there is no pricing data for these time gaps, which are known as “gaps.” Due to the fact that the crypto market trades 24/7, they are only available on traditional platforms like CME.

Where can you trade bitcoin futures?

Many platforms offer access to trade bitcoin futures, regardless of whether you are looking for a seamless, regulated, or centralized exchange. 

BTCC: BTCC is a cryptocurrency exchange based in London, founded in June 2011, aimed at providing users with a reliable cryptocurrency trading experience.

CME: Traders can also access bitcoin futures on this platform. It uses the Bitcoin Reference Rate, a volume-weighted average price derived from multiple exchanges. The price is usually calculated between 3 p.m. and 4 p.m. CME’s bitcoin futures contract expires on the last Friday of each month and can be traded on Sunday to Friday, from 5 p.m. to 4 p.m. Central Time.

CBOE: The Cboe Global Markets (CBOE) was the first United States-based exchange to offer trades in bitcoin futures contracts. It began offering the product on Dec. 10, 2017, a week after the CME Corporation followed suit. 

Binance:The largest crypto exchange, Binance, also offers traders the opportunity to trade futures with leverage of 125x their margin.

OXEx’s: One of the most popular platforms for trading futures, this platform offers seamless access.

FTX:In order to avoid significant price fluctuations, FTX futures have careful, measured margin calls.

Bybit: Margin and futures trading at Bybit can be leveraged up to 100x for bitcoin and 50x for other crypto assets. 

Kraken, eToro, and many other Crypto Trading Platforms are also available. 

Is bitcoin futures a good move for you?

A Bitcoin Futures Trading is an excellent way to make money, but at the same time, it is also a risky investment. There are many ways to invest in bitcoin, and there is no perfect way to do so today. If you want to explore this space, you must understand its benefits and risks in order to choose the best strategy for you.

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