Crypo Investing

Bitcoin Futures: What You Need to Know

Bitcoin futures enable you to know about Bitcoin trading without owning the underlying cryptocurrency. With Bitcoin futures, you can speculate on the future price of the cryptocurrency without actually holding it. There are monthly contract offers by the Chicago Merc for cash. As an investor, you take cash rather than Bitcoin when you settle the contract.

The first Bitcoin futures contract was launched on December 10th, 2017. The Cboe Options Exchange offered it and continued offering new contracts till March 2019. Places like the Intercontinental Exchange and Bakkt trade Bitcoin futures.

What you need to know about Bitcoin future trading in a nutshell:

  • Bitcoin future does not involve actual Bitcoin cryptocurrency.
  • You are not buying and selling Bitcoin. Instead, you are speculating on the price of Bitcoin.
  • You do not need a wallet or a cryptocurrency platform to trade Bitcoin futures contracts.

Why Bitcoin futures?

There are some reasons why Bitcoin futures might gain your interest:

Security and trust

There is a level of security attached to  Bitcoin futures that give investors the boldness to trade them. Bitcoin futures are traded on an exchange regulated by the Commodity Futures Trading Commission (CFTC). Aside from regulating the trade around commodity futures, this independent federal agency promotes efficiency in the market. 

It also protects investors from manipulations and fraudulent activities and abusive trade. In other words, it protects the interest of investors.  The CFTC was established in 1974 by the Commodity Futures Trading Commission Act.

Giving a platform like this that protects the interest of traders and investors, large institutional investors can now participate in the trade without bothering about their safety. The level of risk is highly reduced, which has consequently increased the level of trust people repose in the system.

No wallet and exchange needed

Bitcoin futures are cash-settled. Therefore, you do not need a Bitcoin wallet before you can be a part of the business. There is no Bitcoin exchange in the transaction. The advantage of this system is that you do not own the underlying cryptocurrency, which means you are not at risk of holding a currency with high market volatility that may yield some losses in cases of unfavorable price changes and market sentiments. Also, it excludes you from the cost of holding Bitcoin.

Limited risk exposure

When trading Bitcoin futures, the risks you are exposed to are limited with price limits and position limits. Position limit sets your ownership at certain boundaries. The aim is to avoid a situation where an investor manipulates the price and moves the market for their gains at the expense of other traders and investors. 

Where can you trade Bitcoin futures?

The markets for Bitcoin futures were initially some cryptocurrency exchanges. However, there was no regulation on cryptocurrencies. The risk attached to these platforms made them not suitable for traders who are taking the ventures seriously. 

CME

With the entrance of Cboe and CME into the scene, the trading of Bitcoin futures assumed a remarkable improvement. While Cboe has discontinued the trade, CME has made remarkable growth. There are the Micro Bitcoin futures, for instance. 

ErisX

ErisX is another platform where you can trade Bitcoin futures. It offers cash-settled Bitcoin futures trading and uses upper and lower bounds to regulate the system. The market is based in Chicago.

Bakkt

Another venue for trading Bitcoin futures is Bakkt. Bakkt was launched in 2019 by Intercontinental Exchange (ICE). It promises an “integrated platform that enables consumers and institutions to buy, sell, store, and spend digital assets on a seamless global network.” Futures trading is one of its first areas of consideration.

OKEx and Binance

Other exchanges include OKEx and Binance, which are also excellent platforms for trading Bitcoin futures. Binance is one of the exchanges reputed for its significant number of open interest contracts.

Getting a broker

Getting a futures broker can be a great deal if you want to perform well in the market. There are several experienced futures brokers you can leverage to make the best out of your trading. Here are some of the best you can choose from:

TD Ameritrade

TD Ameritrade offers Bitcoin futures trading services through its subsidiary, ThinkorSwim. The platform is self-regulated and is NFA-registered. The platform does not specify a minimum amount for opening an account. However, it does require that you have up to $2,000 to receive margin privileges. The platform is suitable for beginners as it offers materials to educate you. It makes catching up easier for beginners. It also makes provision for bonuses for new traders. 

FOREX.com

FOREX.com executed futures trade indirectly through subsidiary FuturesOnline and is NFA-registered. You will have to open an account with $2,500 and have enough deposit to cover margin requirements. To trade Bitcoin futures on this platform, you have to have a minimum of $500 in your account. 

The platform operates a rule that requires you to pay $15 per month if you let your account goes dormant for three months. This platform has a fantastic offer that puts the user first in its priority. It offers a demo account with a deposit of $50,000 virtual dollars to enable first-timers to try the platform, examine their strength, and try their strategies for free. The platform has other exciting offers.

Interactive Brokers

Interactive Brokers offer their services for several areas, including Forex, fixed income, and Bitcoin futures. The margin rates on this platform are one of the lowest you will find in the market. However, it may be more expensive compared to other platforms out there. They have an impressive commission and work policy.

Tips for trading Bitcoin Futures

Trading Bitcoin futures can be a successful venture depending on how prepared you are. If you are well prepared and have plans in place on how to trade Bitcoin futures, you will find it more manageable. Here are some tips to improve your performance and experience while trading Bitcoin futures.

Make a trading plan

Develop a plan to follow as you trade Bitcoin futures. While drawing up a plan, ensure that you take into cognizance the market you will be trading in. There are market behaviors that you have to consider. Any market behavior that will affect your trade needs to be considered. You do not want to perform as a novice in the trade.

Have a clear objective

There must be objectives to your trading. There must be goals you intend to meet. You have to work to meet them. You might have planned to have a level of profit. While some factors may be beyond your control, you can wield some level of control in the trade to make events turn out in your favor.

Know the amount of risk you can take

Every trade involves some risks. Dedicating your time and fund to trading is a huge step that ought to yield the desired dividends. If anything happens and the market is not in your favor or your speculations are not correct as you think, then you should be able to bear the outcome. Consider the risks involve in your trade and know if you can bear them if anything does occur.

Prepare to do your homework.

You will be using some technical and fundamental analysis indicators to guide you in your trade. From this analysis, you will receive signals to buy and sell digital currency. You also have to be conclusive on the orders you intend to use. You will need a plan on how to keep abreast of market trends and movements. 

Another area you have to consider is that of money management. The market is volatile, and you cannot be absolute of the movement of prices. Position sizing is an essence. It would be best if you took note of these areas before venturing into Bitcoin futures trading. 

While taking note of these trading strategies and making adequate preparation along these lines, you might need some help. If you have some challenges coming up with a plan of your own or are not so sure in some areas, you can use a plan from experts and other successful investors and traders. 

Conclusion

Trading Bitcoin futures is not difficult if you have access to the necessary information. You will need to trade on an exchange. A suitable exchange will facilitate price discovery and transparency. With a quick registration and a provision of your personal data, you are good to go.

This post was last modified on September 17, 2021 10:25 am

Shawn Du'Mmett

Former IT development and consultant, remote team and collaboration expert, PM, CCO, writer, dreamer, idealist looking to collaborate with global teams on a global teal/turquoise organisation. Shawn's dream is working together openly, to get what writers need and want, and to solve biggest global problems. He is building a collaboration system from the start that everyone can own and define, allowing them to work together, to decide how it works and to their highest ideals.

Recent Posts

Shiba Inu gains 10% overnight as ETH whale invests $11M

TL; DR Breakdown Shiba Inu experienced a rise in price by almost over 50%. Shiba… Read More

October 26, 2021

American Express CEO: Crypto-linked credit card? Not soon

TL; DR Breakdown Amex will not offer crypto-linked cards soon.The company is studying the crypto… Read More

October 26, 2021

United States regulators want banks to hold crypto

TL;DR Breakdown • An FDIC agent confesses that a regulatory plan for cryptos is being… Read More

October 26, 2021

Major South Korean pension fund denies Bitcoin ETF investment rumour

TL/DR Breakdown Korea Teacher’s Credit Union denies any plans of investing in a Bitcoin-backed ETF.It… Read More

October 26, 2021

Iris Energy, Australian crypto mining firm set for IPO

TL;DR Breakdown Iris Energy set to go public on Nasdaq stock.Iris not first crypto mining… Read More

October 26, 2021

New DFSA regulatory framework targets investment tokens in Dubai

TL;DR Breakdown New DFSA regulatory framework targets investment tokens.The framework classifies investment tokens as securities… Read More

October 26, 2021

This website uses cookies.