It is important to understand Bitcoin futures price so as to profitably trade Bitcoin futures. The price of Bitcoin futures is closely related to the Bitcoin spot market price. However, it is interpreted and traded differently.
Bitcoin futures contracts are usually based on Bitcoin. A Bitcoin futures contract is a contract to buy or sell Bitcoins at a predetermined price in the futures. For an investor to open any Bitcoin futures contract; he or she must first register with a registered crypto derivatives exchange that offers Bitcoin futures. The exchange is the one responsible for setting the value of a single Bitcoin futures contract.
Every crypto derivative exchange that offers Bitcoin futures has a set contract size for each Bitcoin futures contract. For some, the contract size is $1, other it is $5, etc. Therefore, for a trader to invest a large amount of money, he or she has to buy a number of contracts.
Does the spot market prices affect Bitcoin futures price?
The price of a Bitcoin futures contract is normally set by the exchange offering the Bitcoin futures and it is defined as a contract size. The investor then places a value for the number of Bitcoin futures contracts he or she want to purchase. However, the price of the Bitcoin futures contract must be relevant to the type of contract that the trader chooses to open.
For instance, the current price of Bitcoin in the spot market could be $9500 and the investor predicts that the price will drop in the future. Therefore, the trader buys short Bitcoin futures contracts worth $2000. This means the trader will have invested an amount worth 0.21052632 Bitcoins. The number of Bitcoin futures contracts that the trader buys will depend on the size of a single contract of the exchange. By buying short Bitcoin futures contracts; the trader is set to make profits when the price of Bitcoin in the spot market drops.
On the other hand, if the trader predicts that the price of Bitcoin in the spot market shall rise and the trader buys long Bitcoin futures contracts worth $2000 (meaning the trader invests an amount worth 0.21052632 Bitcoins). When the price of Bitcoin in the spot market rises above $9500000, the account balance of the trader will increase. In short, the balance will be calculated as the current value of Bitcoin in the spot market multiplied by the worth of Bitcoins the investor had invested (which in this case is 0.21052632).
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