Jun 20, · Bitcoin futures is a new trading instrument which came from usual stock market. Seems to be a new hard concept to understand – how do Bitcoin futures work in trading, what are the exchanges and how to use them. We explain everything about them in this article/5(K). Jan 30, · Bitcoin futures allow investors to gain exposure to Bitcoin without having to hold the underlying cryptocurrency. Like a futures contract for a . Dec 11, · Bitcoin futures trading: What is futures trading? Futures trading is a form of something called a “forward contract”. In finance, these forward contracts are a Author: Vaughn Highfield.
Bitcoin futures trading what is itHow To Invest In Bitcoin Futures
Further, futures can help hedge against risk against the volatile price fluctuations of Bitcoin. Financial futures are contracts that specify the buying or selling of an underlying asset at a predetermined price on a precise date in the future. Counterparties are obligated to fulfill the terms of the contract upon expiration, either buying or selling the asset at the price once the contract expires. Parties can take two positions in a futures contract; long or short.
They are regularly used for two purposes:. In the first case, a party can purchase a futures contract on a commodity — such as oil — if they anticipate that the price of oil will rise leading up to the expiration date of the contract. Futures are not limited to commodities, however.
They can be used as a tool for the speculation on the price of financial assets as well. In the second case, futures contracts are used as a hedge against adverse price movements that would affect an entity that actively uses or produces the underlying asset in the contract. In this way, a party can ensure more stable financial results from their business at the current price rather than suffering losses from adverse price movements. Futures contracts often lead to a less volatile price of the underlying asset in the long-term, especially if the futures market for the asset is highly liquid.
Bitcoin futures are futures contracts that speculate on the price of Bitcoin without participants actually having to own Bitcoin. Upcoming futures trading platforms like Bakkt offer physical delivery of the underlying asset for contracts, but it still remains within their custody rather than the purchasing party having to directly buy and sell Bitcoin on cryptocurrency exchanges and store it in their own wallet.
You can use BTC futures as a hedging instrument to decrease the possible risk of losing money or to speculate. Currently, there are only cash-settled Bitcoin futures on the market. However, the long-awaited trading platform Bakkt will offer contracts that mandate the physical delivery of Bitcoin after the expiration date.
If you expect BTC to grow — you buy, if you expect it to fall — you sell. However, futures contracts have some benefits over assets trading:. The futures market has high requirements. It depends on the exchange.
Thus the market is really only available to big traders. On the day of expiration, futures obligations must be fulfilled — mutual settlements between participants in the transaction are made by paying the price difference variation margin , or the underlying asset is delivered.
Did you like this article and want to read more? Follow our Twitter or Facebook to keep up with the latest news and articles on the cryptomarket. What is futures? The main types There are two types: deliverable and cash-settled: The first one requires that a buyer get a real asset gallons of fuel, Apple shares, Bitcoin, etc. The second only necessitates cash settlement which is quite clear from its name , without delivery of the physical asset. This type is widely used in trading because you can speculate on the price alone.
How do they work in trading? How do Bitcoin futures work? You can play long or short: Long positions are based on the BTC growth forecast. Financial Futures Trading. Metals Trading. Your Money. Personal Finance. Your Practice. Popular Courses. Bitcoin Guide to Bitcoin. Cryptocurrency Bitcoin. What Are Bitcoin Futures? Key Takeaways: As with a stock or commodities futures, Bitcoin futures allow investors to speculate on the future price of Bitcoin. CME offers monthly Bitcoin futures for cash settlement.
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