If the regular drama in the crypto scene has indicated something, it is that cryptocurrencies are here to stay. Admittedly, the cryptocurrency market is one of the most expansive markets and might just be one of the leading markets globally in the future.
It is just as well that there are numerous exchanges out there with sole purposes of offering the public ways of getting their hands on cryptocurrencies. However, with constant run-ins of exchanges with financial watchdogs and price volatility, securing one’s place in the market is no easy feat.
The expansion of the market to futures has ensured that some of these problems could be tackled. And with two heavily regulated exchanges on this, investment in futures just got better.
With these crypto alternatives gaining traction with time, it is important to note that however promising investments in futures, especially Bitcoin futures are, gaining a little insight into their significance is crucial.
Bitcoin Exchange Futures
Futures are major contracts that trade on the exchange. The futures market allows an investor purchase and sells a particular asset class at a price with a settlement set date at some point in the future. In most cases, futures contracts majorly feature
- Details of the asset in question
- The size of the purchase accomplishment
- The expecting maturity date
- The final trading date
- The exchange on which the futures need trading
Therefore, you could see Bitcoin futures as agreements which indicate that certain amounts of Bitcoin will be given out to the other party at some point in the future. The peculiarity of these Bitcoin futures is that it is dependent on the price of Bitcoin.
Hence, the valuation of Bitcoin futures is based on the price of Bitcoin at that moment. One of the advantages of these alternatives is that they give investors an edge when it comes to trading Bitcoin.
Investing in Bitcoin Exchange Futures?
The CBOE and CME are the only two exchanges with regulated access to trading in Bitcoin futures. To invest in these exchanges, you need an online broker. In the case of CBOE’s Bitcoin futures, brokers such as Advantage Futures, Interactive Brokers, Swissquote and TradeStation are accepted on the exchange. The broker usually requests a test of knowledge in most cases.
The CBOE’s futures peculiarity is that Bitcoin futures dependent on Gemini’s auction prices are majorly lists on the CBOE. Likewise, the CME Group provides the list of accepted brokers on their major website.
The CME or CBOE then pairs you up with the relative parties with best-suited offers. It is important too, however, to understand that sizes and margins of contracts differ on these exchanges. Hence, it is important to note that investors need to meet Mark-to-Market calls during their contract.
This means that in the case of trading with margin, as the price of the future changes & there is a loss on the part of the investor. However, more deposits need to accomplish for margin funding account. If the loss incurs is too much, the position closes.