Bitcoin Futures: Simply Speaking, But In Detail
The December of 2017 was marked not only by the historical maximum of BTC price, also, two of the largest American exchanges (CME and ITS) announced the beginning of trading in Bitcoin futures. In this article we'll talk about what futures are and what is the mechanism of their work on the cryptocurrency market. Contents: (please, click the topic to scroll down to it)
- What are Bitcoin futures?
- The mechanism of work
- Exchanges where futures are traded for BTC
- The amount of collateral and commission
- Hedging of risks
- Advantages of Bitcoin futures
- The main risks
1. What are Bitcoin futures?In short, futures is a contract where the price of buying or selling a particular asset is prescribed in advance. Futures contracts have been widely used in traditional markets for a long time. They are of two types:
- financial futures;
- commodities futures.
2. The mechanism of workThe whole process of trading can be divided into three stages:
- Determining the entry point. At this point, the trader is trying to predict the price of the asset in the future.
- Waiting for the right moment. There can be two scenarios: the positive one and the negative one. In the first case, the trader was right and closed the contract with profit, and in the second one, the price went wrong and the trader needs to wait for the moment when it will be possible to close the deal with minimal losses.
- Completion of the contract.
3. Exchanges where futures are traded for BTCThere are two places where you can trade futures for BTC:
- CBOE (Chicago Board Options Exchange);
- CME (Chicago Mercantile Exchange).