Futures have been around in the world of investment for centuries, but they only entered the cryptocurrency sphere at the end of 2017. The futures of Bitcoin are available in a number of regulated exchanges that were eager to start Bitcoin futures trading, offering people new ways to invest in crypto.

Many people still do not understand the concept of the future of Bitcoin. This article will provide insights into the future idea of ​​BTC. How can they trade, and what exchanges can Bitcoin use to trade in the future? Before explaining Bitcoin’s concept of the future, let us first explain the meaning of the future.

What are Futures?

How does Bitcoin Future Works

When futures have Bitcoin as the primary asset type, then they are known as Bitcoin futures. Bitcoin futures enable investors to gain exposure to Bitcoin (BTCUSD) without having to hold the underlying cryptocurrency. What this means is that the futures contract is based on the speculative price of Bitcoin. They are similar to a futures contract for a commodity or stock index in that they allow investors to speculate on the cryptocurrency’s future price. Bitcoin futures may be used as a tool to hedge Bitcoin and to mitigate the risk of losing your investment.

A futures exchange or smart contract facilitates the transaction.

• Long position: Buying an asset when the contract expires.
• Short position: Selling an asset when a contract expires.

Types of Future Contracts

Futures are classified into two major types, which include cash-settled and deliverable.

 Deliverable Futures Contract

In the case of a deliverable, a buyer buys a physical asset as part of the contract. A tangible asset may range from crude oil, Bitcoin, shares in Apple, etc. The asset has to be purchased at the end of a contract.

 Cash Settled Futures Contract

The cash-settled type of future is very different from the deliverable. In this case, there is no physical purchase of an asset. Since you are not required to deliver any tangible asset, the speculation of the value of an asset is used in this regard to negotiating futures.

What to know before YOU start trading Bitcoin

No cryptocurrency trading platform or wallet is needed. This is because futures contracts either settle financially on the delivery date or are offset by traders reversing out of their positions as the delivery date approaches. If the buyer or seller of a bitcoin futures contract holds the position and shows a profit on the delivery date, then the difference between the purchase price and the settlement price is paid out to the holder of the futures contract.

Conclusion

Overall investing in Bitcoin futures can be a useful way to get in on Bitcoin without having to buy and hold tokens directly. Bitcoin is a large portion of the growing digital asset market. BTC futures provide investors with transparency, price discovery and risk management capabilities. The contract will also allow individual market participants to access the bitcoin market as well as hedge any direct exposure to bitcoin pricing. Investing in cryptocurrencies involves buying and holding for long-term gains, not trading for short term profits. Usually, Futures trading is not necessarily for beginners and can come with a lot of risk. For a newbies it’s important to do your research before dipping your toes in Futures trading.