What can we expect from Bitcoin futures? Platform updates included.
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What to Expect from Bitcoin Futures: Platform Updates Included
If you're interested in cryptocurrency investing, you may have heard about Bitcoin futures, a financial derivative that allows traders to speculate on the future price of Bitcoin without actually owning it. Futures have been available for Bitcoin since December 2017, when the Chicago Mercantile Exchange (CME) and the Chicago Board Options Exchange (CBOE) launched their respective futures contracts. Since then, Bitcoin futures have gained attention from both institutional and retail investors, as well as regulators and critics. In this blog post, we'll explore what you can expect from Bitcoin futures, includingplatform updates, and how you can use this information to make informed investment decisions.
1. What are Bitcoin futures and how do they work?
Before we dive into the platform updates, let's briefly review what Bitcoin futures are and how they work. A futures contract is an agreement between two parties to buy or sell an asset at a predetermined price and date in the future. In the case of Bitcoin futures, the underlying asset is Bitcoin, and the price is based on the Bitcoin Reference Rate (BRR), which is calculated by CME or CBOE based on the prices of several Bitcoin exchanges. Traders can go long (buy) or short (sell) Bitcoin futures, depending on their market outlook and risk tolerance. If the price of Bitcoin goes up or down, the futures positions will gain or lose value accordingly. However, unlike spot trading, which involves actual Bitcoin transactions, futures trading only involves cash settlements, meaning that no actual Bitcoin is exchanged.
2. What are the advantages and risks of Bitcoin futures trading?
Now that you know what Bitcoin futures are, you may wonder why you should consider trading them, or why you should avoid them. Like any investment, Bitcoin futures have both advantages and risks that you should be aware of. Some of the advantages of Bitcoin futures trading include:
- Increased liquidity: Futures trading allows you to enter and exit positions more easily and quickly than spot trading, as there are many other traders willing to take the other side of your trade.
- Lower capital requirements: Futures trading typically requires less capital than spot trading, as you only need to put up a margin deposit, which is a fraction of the total value of the contract. This can amplify your potential gains or losses, however, so be careful.
- More transparency: Futures trading is more transparent than spot trading, as the prices and volumes are publicly available and regulated by the exchanges. This can reduce the risk of price manipulation or fraud.
Some of the risks of Bitcoin futures trading include:
- Volatility: Bitcoin is a highly volatile asset, and futures trading can amplify the volatility, as the leverage and margin requirements can magnify the price swings. This can lead to significant losses if you're not careful or if the market moves against you.
- Counterparty risk: Futures trading involves a counterparty, which means that you're relying on the exchange or the broker to fulfill their obligations. If the exchange or the broker goes bankrupt or defaults, you may lose your margin deposit or your profits.
- Regulatory risk: Futures trading is subject to regulatory oversight, which means that the rules and requirements may change or vary across jurisdictions. This can affect your trading strategy or your ability to trade.
3. What are the recent updates to Bitcoin futures platforms?
Now that you know the pros and cons of Bitcoin futures trading, you may wonder what's new or upcoming in the platform updates. Here are some of the recent or planned updates to the Bitcoin futures platforms:
- CME: CME has announced that it will launch options on Bitcoin futures in Q1 2020, which will allow traders to hedge or speculate on the price of Bitcoin more flexibly. CME has also recently upgraded its reference rate and index provider to Crypto Facilities, a subsidiary of Kraken, which is expected to improve the accuracy and reliability of the pricing data.
- CBOE: CBOE has decided to stop offering Bitcoin futures contracts after the last contract expires in June 2019, citing low trading volumes and market demand. This means that CME will be the only major exchange offering Bitcoin futures in the US, at least for now.
- Bakkt: Bakkt, a cryptocurrency platform backed by Intercontinental Exchange (ICE), the parent company of NYSE, has delayed the launch of its physically settled Bitcoin futures platform several times, but is expected to finally launch in Q3 2019. Bakkt's platform will allow traders to receive actual Bitcoin instead of cash settlements, which may attract more institutional investors and increase the demand for Bitcoin.
4. How can you use this information to invest in Bitcoin futures?
Now that you know what to expect from Bitcoin futures, including platform updates, you may wonder how you can use this information to invest in Bitcoin futures. Here are some tips and strategies to consider:
- Know your goals and risks: Before you start trading Bitcoin futures, make sure you have a clear understanding of your investment goals and risk tolerance. Bitcoin futures can be a high-risk, high-reward investment, so be prepared to lose your entire investment or more.
- Learn the basics: If you're new to futures trading, take the time to learn the basics of futures trading, including the terminology, the mechanics, and the regulations. You can find many online resources, books, and courses that can help you.
- Choose your platform: If you decide to trade Bitcoin futures, choose a reputable platform that suits your needs and preferences. Consider factors such as fees, liquidity, security, and customer support. You may also want to test the platform with a small amount before committing a large sum.
- Develop a strategy: To increase your chances of success, develop a trading strategy that fits your style and goals. This may involve technical analysis, fundamental analysis, or a combination of both. You may also want to use tools such as stop-loss orders, limit orders, and position sizing to manage your risks and returns.
- Stay informed: Finally, stay informed about the latest news, trends, and developments in the Bitcoin and cryptocurrency markets. Follow reputable sources, such as news outlets, blogs, and social media accounts, but also be critical and skeptical of hype, rumors, and scams.
In conclusion, Bitcoin futures can offer both opportunities and challenges for cryptocurrency investors, depending on their knowledge, skills, and risk appetite. By understanding what to expect from Bitcoin futures, including platform updates, and applying the best practices of futures trading, you can increase your chances of achieving your investment goals. However, always remember that cryptocurrency investing is a dynamic and unpredictable field, and that no investment is guaranteed to succeed. Therefore, always do your own research, consult experts and advisors, and invest only what you can afford to lose.