crypto futures

Cryptocurrency Futures Defined, and How They Work on Exchanges


What Are Cryptocurrency Futures?

Cryptocurrency futures are contracts that allow traders to speculate on the future price of a digital asset. Unlike traditional futures, which are based on commodities like oil or gold, cryptocurrency futures are based on digital assets like Bitcoin or Ethereum. These contracts can be traded on decentralized exchanges (DEXes) or centralized exchanges that offer cryptocurrency derivatives.

Cryptocurrency futures can help to hedge against volatility and regulatory risks. For example, if a trader believes that the price of Bitcoin will increase, they can buy a Bitcoin future. If the price of Bitcoin goes up, the trader will make a profit. However, if the price of Bitcoin goes down, the trader will lose money.

Cryptocurrency futures can be a valuable tool for both hedging and speculation. However, they are not without risk. Before trading cryptocurrency futures, make sure you understand the potential risks and rewards.

Understanding Cryptocurrency Futures

In short, a cryptocurrency future is a contract between two parties to buy or sell an asset at a set price and date. The key word here is “contract.” Unlike other kinds of investments, futures contracts are legally binding. That means that if you agree to buy an asset in the future for $1,000 and the price of that asset goes up to $2,000, you’re still obligated to buy it for $1,000. 

Now, you might be thinking, “Why would I ever agree to something like that?” Well, there are actually quite a few reasons. For one thing, futures contracts can act as a hedge against risk. Let’s say you’re a farmer worried about the price of corn going up. You could enter into a futures contract to sell your corn at a set price, no matter what the going rate is when the time comes to deliver the corn. That way, you know exactly how much money you’ll make and don’t have to worry about market fluctuations. 

Futures contracts can also be used to speculate on the future price of an asset. If you think the price of corn is going to go up, you could enter into a contract to buy corn at a set price in the future. If the price does go up, you’ll make a profit. Of course, if the price goes down, you’ll lose money. 

How do Cryptocurrency Futures Work?

Cryptocurrency futures work in basically the same way as any other kind of futures contract. Two parties agree to buy or sell an asset at a set price and date. The key difference is that cryptocurrency futures are not regulated by government agencies like traditional futures contracts are. That means that there’s more risk involved for both parties. 

Another critical difference is that cryptocurrency futures are settled in cash instead of the underlying asset. So, if you agree to buy bitcoin for $10,000 in six months and the price of bitcoin goes up to $20,000 in that time frame, you don’t actually have to pay $20,000 worth of bitcoin. You would pay the difference in cash—in this case, $10,000. 

Lastly, it’s important to note that cryptocurrency futures are not yet available on major exchanges. Currently, they’re only traded on smaller exchanges like BitMEX and Deribit. That means less liquidity and higher fees are involved with trading them. 

Why Use Crypto Futures? 

Crypto futures offer several benefits to traders. First, they provide a way to speculate on the future price movements of an asset without actually owning it. This allows traders to take a position without worrying about storage or security issues. Second, crypto futures contracts are traded on regulated exchanges, which provides greater transparency and safety than some over-the-counter (OTC) exchanges. Finally, crypto futures offer greater leverage than traditional spot trading, which means traders can control a more prominent position with less capital. 

Special Considerations While Trading Cryptocurrency Futures


When trading cryptocurrency futures, there are a few things you need to keep in mind. First and foremost, crypto is a highly volatile market. This means that prices can swing wildly up and down in a relatively short period of time. You need to be prepared for this volatility and have a strategy for reacting to it. 


Another thing to consider is that crypto is a 24/7 market. This can be both good and bad, depending on your perspective. On the one hand, it means you can trade at any time of day or night. On the other hand, it also means that the market never sleeps – which can make it hard to keep up with the news and events that could impact prices. 


Finally, because crypto is still a relatively new asset class, there’s a lot of uncertainty surrounding it. Regulations are constantly changing, and there’s always the possibility that something could happen that completely upends the market overnight. This uncertainty can make trading crypto futures risky, but it can also create opportunities for those willing to take on some risk. 

Cryptocurrency Futures Options

Regarding cryptocurrency, a lot of lingo and jargon get thrown around. From “HODLing” to “FUD,” it can be tough to keep up with all the slang. But one phrase you’ll want to familiarize yourself with is “futures options.” Cryptocurrency futures options are a type of derivative that gives you the right—but not the obligation—to buy or sell an asset at a predetermined price at some point in the future. In this blog post, we’ll break down everything you need to know about cryptocurrency futures options so you can make informed trading decisions.

What are Cryptocurrency Futures Options?

Cryptocurrency futures options are a type of derivative that allows you to speculate on the future price of an asset without having to own the underlying asset itself. For example, let’s say you think the price of Bitcoin will go up next month. You could buy a Bitcoin futures contract that gives you the right to buy one Bitcoin at $10,000 30 days from now. If the price of Bitcoin goes up to $10,000 or higher within that time frame, you will profit from your contract. However, if the price of Bitcoin falls below $10,000, you will lose money on your contract. 

Cryptocurrency futures options contracts are traded on exchanges and can be for any time – from a few hours to several months. Traders use them to speculate on the future price movements of assets like Bitcoin, Ethereum, Litecoin, and more. And because they are derivatives, they can be used to hedge against risk or take advantage of leverage to maximize profits. 

How do Cryptocurrency Futures Options Work? 

For a cryptocurrency futures option contract to exist, somebody must be willing to take on the opposite side of your trade (i.e., somebody who thinks the price is going down). When you buy a cryptocurrency futures option, you are buying the right – but not the obligation – to buy (or sell) an asset at some point in the future at a predetermined price. The person selling you that contract must buy (or sell) the asset at that same price if you choose to exercise your option. 

Both buyers and sellers of cryptocurrency futures options contracts typically have strong convictions about where they think prices are headed. Buyers believe prices will go up, and sellers believe prices will go down. Because both sides have skin in the game, this creates what’s known as a “balanced market.” It also means prices can change rapidly as new information becomes available or trader sentiment shifts. 

When Should You Use Cryptocurrency Futures Options? 

Cryptocurrency futures options can be used for speculation or hedging purposes. For example, let’s say you own 1 BTC, which is currently worth $8,000, but you’re worried about a potential market crash in the next few months, so you decide to hedge your position by buying a BTC put option with a strike price of $6,000 that expires in two months time. If BTC falls below $6,000 within those two months, your put option will increase in value and offset some of your losses on your 1 BTC position. Similarly, if BTC rallies above $8,000 during that time frame, your put option will decrease in value, but your 1 BTC position will increase in value, offsetting those losses.  

Alternatively, let’s say you don’t own any cryptocurrency but think prices might rise soon, so decide to speculate by buying a BTC call option with a strike price of $10,000 that expires in one week’s time. If BTC rallies above $10k within that week, congratulations – you just made some easy money. Of course, if prices don’t move as much as you hoped or even fall below $9k, you will lose all or most of your investment. But remember: with significant risk comes great reward. Remember: never invest more than you can afford to lose. 


Are Crypto Futures Legal in Europe?

Yes, cryptocurrency futures are legal in Europe and most other countries worldwide. However, there may be specific laws or regulations that need to be taken into consideration before trading such derivatives. It is best to consult with a financial advisor to determine if crypto futures are suitable for you.

Where Can I Short a Crypto in Europe?

Cryptocurrency futures contracts can be shorted on exchanges in Europe and worldwide. You will need to ensure that the exchange you choose is properly licensed and regulated before trading.

What Is Futures Expiration In Crypto?

Futures expiration is when a futures contract will expire and no longer be valid. At this point, any open positions must be closed or rolled over to another contract if desired. The expiration date of a futures contract can vary from a few hours to several months, depending on the exchange and the specific asset being traded.

Where Can You Trade Cryptocurrency Futures?

Cryptocurrency futures can be traded on various exchanges around the world. It is important to research the exchange and ensure that it has good liquidity, low fees, and proper regulations before trading. Popular exchanges include Coinbase Pro, BitMEX, Deribit, Binance Futures, and more.

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