Why You'll Need Crypto Delivery Contracts: A Must-Have Manual For Traders

We are here to help you get to know delivery contracts, the emerging type of crypto derivatives. Continue reading to learn about delivery contracts and why you should add them to your portfolio.

What are Delivery Contracts

If you are an experienced trader, you must be familiar with perpetual contracts or ‘perps’. If you are new, welcome and be an avid reader - we have several guides around the topic of trading for you to devour after you’ve finished this article:

Crypto trading terminologies for beginners

What is Futures Trading?

What is Margin Trading?

What are Perpetual Futures Contracts?

A beginner’s guide to crypto trading strategies (Volume I Volume II)

Anyhoo, a futures contract in traditional finance (TradFi) is an agreement between two parties to trade a particular asset at a predetermined price at a specific time in the future. When it comes to crypto, we have revolutionised trading with the invention of Bitget perpetual futures - a special type of futures contracts that never expire, meaning you can open/close your position 24/7 and hold them for as long as you want. The beauty of perps lies in the fact that crypto markets are ever-wakeful; we are always on the watch for profitable opportunities.

But we are also adopting the TradFi standard: delivery contracts, which are simply futures contracts that have an expiration date. Apparently, the term delivery says that something will be delivered to your account at expiration, meaning you have the chance to lock in a future price of a cryptocurrency and benefit from the difference between the locked-in price and the market price when the contract is closed. That ‘something’ can either be the underlying asset or cash. Most crypto derivatives are settled on a cash basis.

Below is a summary of perps and delivery contracts:

Why do we need Delivery Contracts?

We are at an unprecedented time in history. Never before has crypto been more welcomed than these days, and never before has it been more lucrative. However, crypto ownership may not be the best option out there due to unclear regulations. Futures give us a way out; we can take advantage of a price position without having to hold or own any crypto asset, and derivatives markets are significantly more liquid.

Now let’s get back to the table above. Delivery contract owners have to pay a one-time fee at settlement before the delivery of gains (or losses) takes place. Compared to perps’ funding fees that incur three times a day, delivery contracts appear to be a much more economical choice for long-term traders. Mind you, delivery contracts also serve the purpose of hedging, therefore adding delivery contracts to your portfolio is a sensible move, risk-wise.

And a big note here.. Bear markets and sideways are definitely not for the faint of heart, as well as traders who are prone to FOMO (fear of missing out). Therefore investing in delivery contracts can protect impulsive traders from themselves - no more quick open/close then regret!

From an advocate point of view, the emergence of delivery contracts is important to the price discovery process for cryptocurrencies, i.e. it gives spot market participants a hint of what market expectations (at a later time) are and allows them to adjust their bid/ask price accordingly, which contributes greatly to the establishment of a fair and efficient price. For arbitrageurs, delivery contracts reveal when and at what price they can deploy their buy/sell plans. That is the one thing missing from perps, as the perps price closely follows the spot price thanks to the funding rate system.

Trading Delivery Contracts on Bitget

As the leading crypto derivatives exchange, Bitget has already released a spectrum of products vital to the sustainable development of the digital space. Our curated financial instruments include: Bitget Coin-Ⓜ Futures, Bitget USDT-Ⓜ Futures, Bitget USDC-Ⓜ Futures, Bitget Copy Trade, Bitget Spot Trading, and now Bitget Delivery Contracts, together with powerful tools (Bitget Futures Grid, Bitget Spot Grid) and a variety of DeFi-inspired services.

A complement to Bitget-verse

Current pairs available for Bitget Delivery Contracts are BTCUSD and ETHUSD, which will be settled on BTC and ETH, respectively. We already mention that delivery contracts are of big help for hedging, but it also creates arbitrage opportunities. That is, you can head to Bitget Spot Trading, scoop up some Bitcoin and sell your delivery contracts if (delivery) contract price is higher than spot price and vice versa. Meanwhile, traders can still ride the waves with adjustable orders (open, close, position reduction, TP/SL) via our Coin-Ⓜ Futures, USDT-Ⓜ Futures or USDC-Ⓜ Futures.

Portfolio planning and strategy optimising have never been more convenient!

Of great finesse

We pay attention to every little detail to make Bitget Delivery Contracts as refined as possible. Take the contract name as an example: The name of Bitget Delivery Contracts consists of the underlying pair and the expiration date (BTCUSD1230, BTCUSD0331, etc.). We put ourselves in the user’s position and choose the most self-explanatory name so that our users never get confused.

Besides, Bitget Delivery Contracts also offer multi-currency margin. For now Bitget traders can use USDT, USDC, BTC, ETH, XRP as margin; more options will be introduced later. This should work well for seasoned traders as well as users who want to utilise their crypto holdings. Talk about efficiency.

When it comes to costs, Bitget Delivery Contracts are automatically settled at the Taker rate. That is the only payment delivery contract traders will have to make.

Suitable for any level of risk tolerance

Any trader can find a way to take advantage of Bitget Delivery Contracts as we embrace a risk management-oriented philosophy that involves the three following factors:

(1) Product design:

Bitget Delivery Contracts will be first available for 3-month periods, i.e. in the form of Quarterly Delivery Contracts. We believe this should be the basic interval as traders can employ lucrative schemes without being affected by general, day-to-day events, whereas it would be more difficult to pinpoint the suitable strategy for a longer period of time. In short, we are trying to prep our users for more advanced strategic trading tools to come with the intro of Bitget Quarterly Delivery Contracts.

Please note that new contracts for the quarter after next will be generated right after settlement of the current quarterly contracts, allowing a continuous observation of market activities that is represented by the stochastic indicator K-line and preventing any possible confusion that stems from overlapping contracts. More about K-line can be found here.

(2) Settlement:

Settlement will occur at 8:00 AM (UTC) on the last Friday of each quarter, where the m ark price is calculated, liquidations are triggered and delivery of P/L takes place. Mark price for Bitget Delivery Contracts is the sum of the index price and the average of the differences between order prices and the index price taken 1 hour before the delivery time, with the index price calculated by taking the weighted average of spot prices from various exchanges other data sources. This action will ensure fair price (minimise the probability and/or impact of price manipulation on one single exchange) and be of huge advantage to our users, as some exchanges capture prices over a 1-hour period to calculate the mark price, making delivery contracts more prone to getting liquidated.

We also apply strict rules for settlements to offer a faultless settlement process:

• No manual closing allowed during settlement/delivery;

• No contract opening allowed in the first 10 minutes of settlement/delivery;

• Contracts that are not closed manually will be automatically settled and delivered.

(3) Bitget’s intervention:

In extreme market conditions where users can be heavily affected, Bitget will decide between these two options:

• Conduct delivery before triggering liquidations

• Delay the settlement and delivery process until further notice

The whole meaning of our intervention is to protect users’ funds from any potential market manipulation or adverse situations.

Simply create an account, and start exploring the incredible Bitget-Verse today!