Bitcoin has the highest market capitalisation of any cryptocurrency. It, like other cryptocurrencies, is extremely volatile. In March 2020, for example, Bitcoin’s price nearly halved in a matter of days as markets tumbled amid pandemic fear. By early September, it had risen from around $4,000 to highs of $12,000 before plummeting back to under $10,000.
Spot trading, or buying and selling Bitcoin, requires traders to swap cryptocurrencies at their current values. But what if there was a way to lock in that $4,000 price and then pick up the Bitcoin a few months later? So, even if Bitcoin’s price reaches $12,000, the counterparty must deliver the Bitcoin purchase for $4,000.
Yes, there is! It’s known as a futures contract. A futures contract is an agreement between two traders to buy or sell an item at a certain time, amount, and price. For example, in mid-March, you might contract to acquire one Bitcoin for $4,000 on August 30. If you’re a buyer, you want the trading price of Bitcoin to go up, as you will be able to buy the cryptocurrency at below market value, while sellers want the opposite, profiting if Bitcoin were to decrease in price.
People have gone crazy over Bitcoin futures contracts, which have been introduced by major firms such as CME Group and TD Ameritrade. When Bitcoin futures debuted on the Chicago Board Options Exchange (CBOE) in December 2017, the CBOE website was inundated with visitors. Every day, over 11,000 futures contracts are exchanged on Bakkt, the Intercontinental Exchange’s Bitcoin futures market.
Binance has traded $2.03 billion in futures contracts in the last 24 hours (as of September 10), Huobi has traded $2.01 billion, OKEx has exchanged $1.85 billion, and BitMEX has traded $1.05 billion.
Post a Comment