Trading101: The Ultimate Guide to Bitcoin Futures Contracts on Bitget
Welcome to Bitget - the world’s fastest growing crypto derivatives trading platform.
The Bitcoin futures contract is an alternative investment opportunity for crypto investors.
Compared to directly buying Bitcoin, a futures contract is a more complex product. In-depth understanding of the mechanism is required to conduct safe and reliable transactions.
The entry barrier of Bitcoin Futures Contracts is relatively high (it does really require more knowledge and experience). This article conveys the basic knowledge and strategies of future trading and how to carry out safe and reliable transactions.
Contents
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What is a Bitcoin Futures Contract?
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An Example of a Bitcoin Future Transaction
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What is the Bitcoin Futures Contract for?
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Benefits of trading Bitcoin Futures Contracts on Bitget
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How to Trade Bitcoin Futures Contracts on Bitget
What is a Bitcoin Futures Contract?
Bitcoin Futures Contract is a kind of derivative product similar to traditional futures contracts. It is an agreement between two parties to buy or sell a specific amount of Bitcoin at a specific future time.
Each future transaction will include both long (agree to purchase) and short position (agree to sell). If a buyer goes long on a Bitcoin futures contract and the marked price on the contract is above the forward price at the expiration date, the buyer will profit and the short position will suffer loss.
If the marked price is below the forward price at expiration date, you will lose money and the short position profits.
An Example of a futures Transaction
Here is an example of a Bitcoin futures transaction: Imagine a buyer has purchased 10 Bitcoin futures contracts right now and the expiration date is 1 month later.
| Amount of Bitcoin Futures Contracts purchased |
10 |
| Marked Price on the future contract |
$40,000 USD |
| Forward price at the expiration date |
$45,000 USD |
| Total profit earned by the buyer(go long) or profit loss of the seller(go short) |
10x(45,000-40,000)= $50,000 USD |
You may be frustrated about how they make and lose money in futures transactions? At the expiration date, the buyer can buy 10 Bitcoins from the seller at a price of $40,000 USD for each.
The current marke t price is $45,000 USD. The buyer can buy 10 Bitcoins at a lower price than the market price and resell at the market price to make profit. The seller is forced to sell 10 Bitcoins at a discount, due to the future contract signed.
If the marked price is below the forward price at the expiration date, you will lose money and the short position profits like below:
| Amount of Bitcoin Futures Contracts purchased |
10 |
| Marked Price on the future contract |
$40,000 USD |
| Forward price at the expiration date |
$35,000 USD |
| Total profit loss by the buyer(go long) or profit earned by the seller(go short) |
10x(40,000-35,000)= $50,000 USD |
At the expiration date, the buyer is forced to buy 10 Bitcoins from the seller with a higher price, which is $40,000 USD for each, but the current market price is $35,000 USD only.
The seller is able to sell 10 Bitcoins at a higher price, which is $5,000 USD higher than the current market price for each, due to the future contract signed. That’s how Bitcoin futures investors make money.
What is the Bitcoin Futures Contract for?
Speculation
Some investors may use Bitcoin Futures Contracts for speculative purposes. They may make a huge profit if they predict the market movement accurately.
It involves multiple and comple x trading strategies which are not favorable to investment newbies.
Reduce risk of volatility
But the main purpose of the Bitcoin Futures Contract is to manage the risk. Both buyers and sellers can purchase a certain amount of Bitcoins through locking them up at a fixed price in the future. It aims to reduce the risk of volatility of the price of Bitcoins. This process is called "hedging".
Futures contracts have been a hedge for a long period of time,such as commodity markets, like oil and rice. The price of oil and rice may be influenced by war, climate or political reasons.
In order to reduce the risk of volatility, both buyer and seller always purchase at a fixed transaction price and quantity through setting up futures contracts. Sellers need steady earnings to cover costs. Buyers need to purchase at a steady price and quantity to fulfill the needs .
Similar to the seller in the commodity market, the Bitcoin miners may take a short position in order to secure the value of the Bitcoin they mined. They have to cover the mining cost spent on electricity and hardware.
Diversification
Investors can diversify the portfolio through carrying out Bitcoin Futures Transactions. You may create a well-balanced portfolio of different coins and products.
Ready to try Bitcoin Futures transactions?
Benefits of trading Bitcoin Futures on Bitget
Launched in 2018, Bitget is now the dominating crypto derivatives trading platform with multiple innovative products, including Bitcoin Futures Contracts.
Activities and Liquidity
Our efforts have resulted in a huge customer base of 2 million users from 40 countries worldwide.
In terms of scale, Bitget is indeed the world’s largest digital copy trading exchange, where over 80,000 professional traders have accumulated a total profit sharing of US$20 million from their 380,000 followers.
Bitget is acknowledged as the Top 3 Crypto Derivatives Exchange in terms of Liquidity by TokenInsight.
Responsible Leverage
Bitget users can conveniently increase their returns with the use of leverage. More volatile assets will have lower leverage levels to reduce traders’ exposure to extreme price movements.
At the same time, we strictly demand that users comply with our margin requirements and introduce risk margin to help users better resist liquidation risks.
Real-time basis
One more unique feature of Bitget is profits and losses are settled on a real-time basis, representing our guarantee for a sophisticated, accurate data system.
Traders will be able to manage their account commensurate with the market, thus always in the process of improving their trading knowledge and skills.
How to Trade Bitcoin Futures Contracts on Bitget
If you want to start trading Bitcoin futures on Bitget, you just need to set up an account and get yourself some funds. Here’s the step-by-step guide to start trading Bitcoin futures contracts:
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Create an account on Bitget and complete the identity verification. If you already have an account and complete the identity verification, you can deposit funds into your future account.
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Purchase some BTC, Tether (USDT), or other supported cryptocurrencies for futures trading. The easiest way to do this is to purchase them with your debit or credit card.
For more: Buy crypto on Bitget with Credit Card, Apple Pay & Google Pay
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Navigate to the Bitcoin futures overview and select the type of contract you want to purchase. Select " Coin-Ⓜ Future " in the upper navigation bar.
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Before opening a position, if there are no assets in your Coin-Ⓜ Futures account, you can click on the "Transfer" function to transfer crypto from other accounts to Coin-Ⓜ Futures account. There is no fee for internal transfers.
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After selecting the trading pair, margin mode, order type, and leverage, enter the price and quantity, and select the direction to place an order.
For more detailed instructions, check The Bitget Coin-Ⓜ Futures: User Guide.
Are you intrigued by the crypto futures market? Secure your trading account today!
If you want to know more about blockchain and crypto-trading information, don’t forget to follow us on Bitget Academy. We have constantly provided useful information for crypto investors, so that they can enjoy better trading and a better life.
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