Over the past decade, Bitcoin (BTC) has had an immense rise in popularity. But some investors have still been sceptical of the cryptocurrency market because of its high volatility, unclear regulation, questionable security, and decentralised nature. But despite the various disadvantages, in 2017, BTC reached legitimacy when the leading global derivatives marketplace, CME Group, launched the trading of BTC futures contracts.
How do BTC Futures work?
BTC futures are a type of derivative contract which permit two parties to make an exchange of an asset or even a cash equivalent on a future date at a predetermined price. When the BTC futures are bought and sold by investors, they wonder about the future price of Bitcoin. You could have various futures contracts for commodities, stock indexes, and currencies. The Commodity Futures Trading Commission regulates the futures market; BTC is considered a commodity, and BTC futures are commodity futures.
Since BTC Futures contracts are traded on the Chicago Mercantile Exchange (CME), this brings about new monthly contracts for settlement in cash. CME offers BTC futures for six months, along with added quarterly contractors for every four future quarters.
Investing in Bitcoin Futures
BTC futures makes it possible for you to gain profitability irrespective of the market conditions. You would be able to navigate every kind of future market condition with profitability because of the feature which makes it possible to make profits even when the BTC price falls. Furthermore, since every BTC futures contract brings five Bitcoins, there is an advantage in the market of BTC futures. You can use this leverage to speculate on the market’s short-term performance to get more significant returns with a small upfront investment.
With this, it is possible to mitigate risk effectively in futures Bitcoin contracts. As a result, it is solidified that BTC futures are helpful both in long-term and short-term investments. Further, you can increase your investment gains with the assistance of leverage. Leverage would allow you to disclose positions more prominent than your current capital. The bigger your means, the more leverage you have with yourself. For this reason, leverage is the driver of capital efficiency and a returns enhancer.
With Bitcoin futures, there are equal pros and cons, just like every other cryptocurrency market. However, these futures contracts can enable you with leverage, flexibility, and risk mitigation with hedging. But in turn, the traders of BTC futures can be subjected to margin calls if they cannot maintain the minor margin requirements of their accounts. Moreover, these traders are also liable to exchange fees, which impact the investment profits.
Benefits of Bitcoin Futures
Bitcoin Futures has advantages such as increasing investment returns due to leverage, the ability to trade in both a falling and rising market, and trading more with low capital. These are some primary advantages, but it has various improvements and benefits compared to Bitcoin. For BTC futures, since CME launched them, there exists a higher confidence in their legitimacy and their ability to be able to become successful venues for future Bitcoin contracts.
More advantages of BTC futures are that the more significant financial firms understand them. Also, you can lose money, but there is a much lower likelihood of losing contracts.
It has been established that there are several advantages to BTC futures, but according to experts, the market of Bitcoin futures is still speculative. Moreover, futures permit you to take on a lot of leverage, which could mean that you may end up with a lot that, in the end, maybe less worth it. But, in the end, presently, BTC futures are considered lucrative and much more profitable than investing in cryptocurrencies.