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How To Trade Bitcoin Futures?

Author: Nicolas Tang Date: December 23, 2020

How To Trade Bitcoin Futures

What Are Bitcoin Futures?

A futures contract is a technique to hedge positions and reduce the risk of the unknown. It is also used for arbitrating between current spot and future contracts. In the case of bitcoins, futures have been more associated with miners who face the risk of unknown future prices. Let’s have a look how to trade Bitcoin futures.

What You Need To Trade Bitcoin Futures

Firstly, you will need to register for an account with a cryptocurrency futures exchange of your choice. It is important to note that the choice of the cryptocurrency derivatives exchange determines your Bitcoin futures trading experience. Therefore, it is important to choose the exchange wisely.

Next, you will be required to fund your trading account. It is important to look at the available payment options so as to determine the cheapest and easiest option. It is also important to keep in mind that at time not all the available payment options could work in your location. Therefore, it is good to confirm which payment options are available for your location before registering with the exchange first.

Depending on the type of Bitcoin futures settlements that you want, you could choose to use Bitcoin or fiat currency as your base currency though it will also depend on whether the exchange offers physical settlements. If the derivatives exchange offers physical settlements, then it could be possible to fund your account with Bitcoins since when your contract expire, you shall be receiving Bitcoins instead of fiat currency.

How Much Do You Need To Start Trading Bitcoin Futures?

Cryptocurrency derivatives exchanges normally offer leverage trading. Therefore, the amount required to open any position is considerably low.

In leverage trading, the derivatives exchange lends the investor some cash to help sustain the positions in the market. Therefore, the investor invests a small amount which is multiplied by a sustain factor (chosen by the investor). For instance, an investor could choose to use X3 as the leverage meaning that whatever amount he commits is multiplied when placing the position.

With that said, there is a minimum initial deposit set by each cryptocurrency derivatives exchange. And any investor willing to invest with an exchange must first deposit that amount into his/her trading account to be allowed to start trading. Therefore, it is important to look at the minimum deposit allowed so as to gauge if it falls within your capabilities.


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