Cryptocurrency futures involve agreements between two investors speculating on the future price of a cryptocurrency.
Futures enable you to explore selected cryptocurrencies’ potential without actually buying them. Crypto futures share similarities with traditional futures contracts for commodities or stocks as they provide a means to speculate on the future price movement of the underlying asset.
Traders face potential gains or losses based on future price fluctuations. For instance, say the Bitcoin price is $40,000, an investor can choose to buy or sell futures contracts, anticipating either a decrease or a price increase.
If a buyer acquires a futures contract valued at one Bitcoin ($40,000) and the price rises to $60,000 upon contract closure, the buyer stands to gain $20,000 in profit. Conversely, if the price falls to $30,000 at contract closure, the buyer will experience a loss of $10,000.
Trading Crypto Futures
When engaging in Bitcoin futures trading, the initial consideration for a trader is determining the contract’s duration. Crypto derivative exchanges typically provide various options, such as weekly, bi-weekly, quarterly, and other durations.
To illustrate, in a weekly Bitcoin futures trade, where each contract represents $1 of Bitcoin at a price of $10,000, you would need 10,000 contracts to initiate a position equivalent to 1 Bitcoin.
A trader has the option to speculate on the price of Bitcoin either rising (going long) or falling (going short). In both scenarios, the exchange platform pairs the trader with someone who has taken the opposite stance. When it’s time for the contracts to be settled, one of the traders will be required to fulfill their obligation, depending on whether the price of Bitcoin has increased or decreased.
Exchanges Where Can You Trade Cryptocurrency Futures?
- Binance: Binance accounted for $58 billion of the total trading volume in Bitcoin perpetuals and futures on July 29, 2023
- ByBit: ByBit ranks among the world’s biggest cryptocurrency exchanges. It had a trading volume of $2.75 billion on July 29, 2023
- Phemex: Started by a derivatives trading firm in 2019, Phemex accounted for $2.1 billion of total crypto futures trading volume on July 29, 2023
- Bitget: Also established as a derivatives exchange initially, Bitget features 215 cryptocurrency pairs for trade, including perpetuals and futures. Trading volume on July 29, 2023, was $3.8 billion
- OKX: OKX offers 424 trading pairs in perpetuals and futures. Trading volume was $4.03 billion on July 29, 2023
