23 hours ago · Bitcoin‘s market has seen a confluence of bullish indicators lately, as explained in a previous article. These indicators are extremely bullish for Bitcoin, be it from a retail perspective or institutional. To add more bullish bias to this, 12, BTC recently exited Coinbase Pro, one of the biggest and most popular exchanges in the United [ ]. Bitcoins aren’t printed, reckon dollars OR euros - What does futures mean for Bitcoin price - they’re produced by computers all around the world mistreatment lodge software and held electronically atomic number 49 programs called wallets. The smallest thing of a bitcoin is called angstrom unit satoshi. Nov 16, · In brief A futures contract is an agreement that obligates a trader to buy or sell an asset at a specific time, quantity and price. Bitcoin futures help to bring in additional liquidity to the market and also provide opportunities for arbitrage. As the trading value of Bitcoin varies, so too will the value of different Bitcoin futures contracts.
What does trading bitcoin futures meanHow To Invest In Bitcoin Futures
Hence, this time around, we might not actually see Bitcoin move sideways. In fact, it might slowly surge, following a trend very similar to the one seen in early Source: Coinstats. While this could be Grayscale, nobody knows for sure.
Akash is a full-time cryptocurrency writer and an analyst at AMBCrypto. He is an engineering graduate with an avid interest in finance and economics. Your email address will not be published. Save my name, email, and website in this browser for the next time I comment. Connect with us. Related Topics: Coinbase featured. Akash Girimath. You may like. Coinbase ready to go public? Click to comment. Leave a Reply Cancel reply Your email address will not be published. Futures contracts are always standardized, trade on exchanges, and detail the quantity of the underlying asset.
Futures contracts may be settled in cash or by using physical delivery of the asset. Futures also provide investors with the opportunity to trade an underlying asset with leverage. In the case of bitcoin futures, the underlying asset is the digital currency bitcoin.
For example, an investor can bet on the price of bitcoin rallying in the new year by buying a bitcoin futures contract today that expires in March at the price of the current March futures contract. Of course, the investor does not need to hold his futures contract until expiry. He or she can sell it at any time during trading hours on the exchange where the futures contract is listed. The CBOE has listed three near-term months but intends to add more in the future. In simple terms, bitcoin futures allow investors to bet on the price of bitcoin without having to actually physically buy and store the digital currency.
This greatly reduces one of the key risks of investing in digital currencies, namely, safe storage. Furthermore, as bitcoin futures are exchange-traded, they could, in theory, become very liquid investment vehicles. This, in turn, could attract more institutional investors to this new digital asset class. So far, liquidity in bitcoin futures has been rather low compared to other commodity futures. However, as they were launched in December, a month in which trading activity is generally lower than in other months, liquidity will likely pick up in the new year.
Additionally, through the use of futures contracts, investors can now bet on the price of bitcoin declining by selling futures. More importantly, however, investors with exposure to digital currencies can now sell bitcoin futures to hedge themselves against a market crash. This will allow more institutional investors to gain exposure to digital currencies going forward as they can reduce their overall crypto asset market risk by shorting bitcoin futures.
Bitcoin futures are also a regulated financial product, which means that large institutional investors who are bound by right regulations are now able to bet on the price development of bitcoin by buying exchange-traded bitcoin futures.
This opens bitcoin up to a much larger investment community than purely high net worth individuals and hedge funds, as has previously been the case. If you are an active trader who wants to take profits through intra-day or intra-week trading of bitcoin, bitcoin futures might be the right option for you since you will be trading a relatively liquid, transparent, regulated investment vehicle.
Also, in this case, the margin trading aspect of bitcoin futures contracts may play in your favor as investors can buy one futures contract but only need to put down 35 percent CME and 44 percent CBOE as initial margin for the trade. Currently, only a handful of brokers have enabled bitcoin futures trading for private clients.
Ally Financial and Interactive Brokers are two of them.