What are bitcoin futures contracts?

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.

Which exchanges are launching bitcoin futures?

CBOE — one of the largest futures trading platforms in the world — launched the first Bitcoin futures in December 2017, followed by another Chicago-based platform, CME. Since then, several platforms and major institutions have signaled their plans to launch Bitcoin futures, including some cryptocurrency exchanges.

Should you invest in bitcoin futures?

Still, it is critical that traders fully understand and manage the risks involved. “Because Bitcoin is fairly volatile, and futures give you the ability to take on a larger position, you can take advantage of short-term swings within the market,” he says. But he warns investors that the Bitcoin futures market is highly speculative.

Why do bitcoin futures traders use leverage?

Because each Bitcoin futures contract represents 5 BTC, there is inherent leverage in the Bitcoin futures market. Bitcoin futures traders often use that leverage to speculate on short-term swings in the market in an attempt to generate large returns on relatively small upfront investments.