What are Bitcoin Futures?
Bitcoin Futures enable you to speculate on what you think the price of Bitcoin will be in the future. They work in exactly the same way as futures on traditional investment assets.
You can take a long position if you expect the price of Bitcoin to rise; or if you own Bitcoin, take a short position to mitigate the impact of potential losses.
Each futures contract contains a specified amount of the traded product. CBOE Bitcoin Futures, for example, each contain one Bitcoin and are based on the Gemini crypto exchange’s auction price for Bitcoin, denominated in US dollars.
A key benefit of Bitcoin Futures is they can be traded on certain regulated exchanges. This could make trading Bitcoin more attractive to people who are nervous about dealing with cryptocurrency exchanges directly.
How does it work?
Entities that participate in Bitcoin futures are essentially making a bet on the price of Bitcoin over a specified period. Bitcoin futures work the same way as any futures contract on a traditional financial asset. Third, by granting Bitcoin more exposure to investors, more liquidity is added to the market.
What are the benefits of BTC futures?
Bitcoin futures contracts are settled every trading day, based on transparent reference price, reflected in all Bitcoin-related contracts. Unified price reference mitigates the volatility of spot prices, making Bitcoin suitable for payment purposes.
This is probably one of the most touted and most controversial advantages of Bitcoin futures contracts. Hardcore crypto fans believe that the regulatory environment kills the libertarian nature of cryptocurrency that was born to be free, but the majority of market players are sure that regulation is a necessary step to Bitcoin mass adoption. The futures markets are regulated by Commodity Futures Trading Commission (CFTC), which is not as strict as SEC in terms of oversight. It sets the rules to be observed by all participants, ensuring equal opportunities for investors and speculators, fraud protection and predictability.
Leverage allows trading many Bitcoins while paying only a portion of the real price. It makes futures trading more appealing to investors as they don’t have to pay the full cost of the asset to profit from the price movements. At the same time, it makes trading riskier and may cause significant losses if a trader gets it wrong.
Bitcoin futures provide traders with the instrument to short sell, that is to bet on price fall without actually owning the asset. It unlocks investment opportunities for crypto skeptics, namely for those who don’t have Bitcoins, but believe that the price will go down.
Where to trade Bitcoin Futures?
Phemex is the fastest cryptocurrency derivatives exchange. Phemex is a professional and trustworthy global cryptocurrency derivatives exchange. We offer Bitcoin, Ethereum, Ripple, Litecoin, and EOS perpetual contracts, with up to 100x leverage.
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