October 15, 2021

Investments are the secret of the rich. Like cryptocurrency trading, they open and join business opportunities. But success is not guaranteed all the time. Some investors are stuck with one venture, while others are trying to boost their returns. That’s how business works, after all. However, you can do something.


As a smart investor, you are in control of many things. For instance, you can devote enough time to understanding how Bitcoin futures work before putting in any cash. Basically, it enables investors to have exposure to Bitcoin without the need for any underlying cryptocurrency. Like futures contracts for stock or a commodity, they allow investors to evaluate and make decisions on the cryptocurrency’s future price.


Understanding Bitcoin Futures Investment


The key to achieving results in any investment venture is to understand the risks and possible gains. Once you can assess the pros and cons, you can decide where to put your money. In the bitcoin futures, the same rule applies. Investors are exploring resources to make well-informed choices.


Bitcoin futures have various purposes in the bitcoin industry. They can be a means for Bitcoin miners to lock in prices that provide a return on mining investments, regardless of the crypto’s probabilities. For many investors, bitcoin futures are used to have a better position in the spot market. Other speculators and traders may use bitcoin futures for short- and long long-term gains, especially if they are frequently moving in and out of the trades.

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Advantages of Trading Bitcoin Futures


  • Bitcoin Futures are Legally Regulated – trades in bitcoin futures are under the regulation of the Commodity Futures Trading Commission. As such, investors can be confident about the security of their transactions. The risk comes when the cryptocurrency is traded outside the prescribed regulations.


  • Bitcoin Wallet is Not Required – bitcoin futures are cash-settled, so there is no need for any physical exchange during the transaction. This eliminates the risk of having a volatile asset class with unpredictable price changes. Likewise, the position limits and price limits in futures contracts can enable investors to control risk exposure to some types of assets.


How Bitcoin Futures Trading Work


Just like regular futures trading, you also need to set up an account with an exchange or brokerage first to begin bitcoin futures trading. Once you get the approval for your account, you can start the transactions. Futures trading involves heavy use of leverage to begin the trading process. The leverage amount depends on the exchanges.


The primary considerations when you create bitcoin futures accounts are contract details and margin requirements. Margins refer to the minimum collateral that you need to have in your account to participate in trades. That means the higher the amount of trade, the greater the margin amount imposed by the broker.

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Keep in mind that Bitcoin is considered a volatile and risky asset, thus the trades require higher margin amounts than any other assets. But there are some exchanges that allow the use of cryptocurrencies as margin.

Also, there are costs in the storage and custody of Bitcoin. These will have to be paid once you get the final delivery of the cryptocurrency as the futures contract is physically settled.

Important Considerations for Trading Bitcoin Futures

Although there is an increase in the volume of bitcoin futures trading, it is still considered at the evolving stage of market dynamics and constituents. Thus, there are some things you need to consider before venturing into this trade:

  • Bitcoin futures trading is similar to spot markets for the cryptocurrency as there is no deep pool of liquidity or enough number of participants in its ecosystem that are active for other commodities. Hence, there can be low trading volumes, but high price fluctuations. Bitcoin futures can trade at a high premium or discount or follow spot market prices.
  • There is still an unclear regulatory landscape where bitcoin futures trading operates. This is because of the few exchanges that provide regulated futures trading. Bitcoin futures trading made outside the United States is not within the power of agencies located in the country. This can result in greater risk even though there may be potential profits through regulatory arbitrages.
  • The price for bitcoin futures is determined according to the price of a volatile underlying asset. Although a theoretical formula to calculate the price exists, there are various factors such as investor perception and significant news events that can affect the outcome.
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Where to Trade Bitcoin Futures


The Bitcoin futures market has grown significantly, just like the cryptocurrency’s spot market. Its first venues were the cryptocurrency exchanges. However, due to the absence of appropriate regulations, there is a presence of risks for the traders.


Nevertheless, the status quo has changed with the launch of the Chicago Mercantile Exchange (CME) and Cboe. The CME has doubled down on cryptocurrencies and introduced other products, while the Cboe has stopped trading in its venues.


Investments in cryptocurrency can have long-term gains. While this may mean exhausting all the strategies available, it could be worth it, after all. When you’re able to accumulate more assets through trading, that’s when the results will begin to show.

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