Everything you should know about cryptocurrency futures


Cryptocurrency futures are seen as a tool to hedge exposure to underlying pricing risks that can impact the outcome of a supplier’s supply chain. It has been great for protecting against price fluctuations, but it also has drawbacks, such as you need more assets when volatility increases and more premium costs in your trade. Here’s some points that make bitcoin different from other cryptocurrencies.

The information below will discuss how cryptocurrency futures contracts work and the many advantages they offer suppliers over traditional ones. You’ll also find out what the future of these products holds in terms of their development and possible regulation into long-term investment instruments like ETFs or other derivatives products in the future.

Cryptocurrency history

The second ever cryptocurrency derived from Bitcoin is known as Litecoin. Litecoin came into existence in the year 2011, which was a copied version of Bitcoin’s source code with some additional features. Around the same time, another cryptocurrency called Litecoin also came into existence which is also a copied version of Bitcoin with its specific features. All coins were based on blockchain technology and included Peer-to-peer networking (P2P), distributed consensus systems and open source software to provide an alternative transfer medium for the digital age.

And so, the cryptocurrency movement was born, with the original creator Satoshi Nakamoto (pseudonym), still unknown). Today’s virtual currencies represent a revolutionary concept of software development and technology that allows people to bypass banks to make transactions with one another at no/low cost worldwide.  It can also be used in non-financial ways for a record-keeping system, including medical records or digital IDs.

What are cryptocurrency futures, and how to trade them?

As mentioned earlier, an index future is a financial contract for differences (CFD) between two parties based on the performance of a specified index, such as commodity prices or equity markets.

Cryptocurrency futures are digital or virtual currency contracts representing a particular underlying cryptocurrency that allows investors to take long, short or buy and hold exposures. Still, other cryptocurrencies have become available in many exchanges as well. One of the most significant aims of trading futures is to lower risk exposure and give investors more options.

Cryptocurrency futures contracts can be offered as an exchange-traded product like the E-Mini Dow Jones Futures or a technically listed product (American style) with the physical delivery of assets or cash settlement based on the value of the contract.

How does cryptocurrency futures trading work?

Cryptocurrency futures trading is similar to any other type of derivatives trading in that investors can trade on levels above and below the asset price. Still, most commonly, they are options to buy or sell at a set price from a specified date known as “expiry”. 

If a cryptocurrency price goes up, someone could sell futures contracts to lock in their profit, while if the price goes down, traders can buy futures contracts to profit from it (known as shorting the market).

Cryptocurrency exchange-traded product has many advantages, such as reducing counterparty risk (you’re not relying on one party to hold your assets), transparency and convenience, and fewer margin requirements compared to traditional options trading.

Profit potential cryptocurrency futures:

It’s possible to make money in cryptocurrency trading by either selling short or going long, which means you can profit from the price rises or falls against the dollar. Cryptocurrency futures products have become increasingly popular in the last year, with people starting to take interest and participate in these new markets.

The cryptocurrency index is still a small market compared to the traditional derivatives. Still, it’s growing at a breakneck pace with plenty of exchanges offering leverage and margin trade options. In addition, because cryptocurrencies are highly volatile and don’t correlate to other assets, cryptocurrency futures allow investors to hedge out risk from these types of assets that usually have low volatility. 

Is Binance the best place to trade cryptocurrency futures?

Binance is a medium-sized exchange with a shallow fee structure and a good amount of liquidity. It makes it an ideal place to trade cryptocurrency futures as plenty of markets are available, and the exchange offers leveraged trading, allowing you to trade in both directions (buy or sell) for less than 1:1 leverage. 

Cryptocurrencies have control over their own money, which means they have complete flexibility over where to invest their capital and can execute trades at any time without permission from others.