Futures trading has become a hot topic in the crypto space over the last few years. On BTSE, futures trading products currently have two different time formats: perpetual and time-based futures.
What Does It All Mean?
Starting at the very top, futures trading gives you the ability to speculate on the price of different assets without requiring you to actually buy and sell those underlying assets.
Trading Bitcoin futures, for example, involves buying and selling contracts. Each contract tracks the price of 1/1,000 of 1 BTC. Therefore, 1,000 Bitcoin futures contracts on BTSE equates to the price action of 1 BTC.
BTSE offers futures trading products for Bitcoin (BTC), Tether, (USDt), Ethereum (ETH), Litecoin (LTC), Monero (XMR), and Index Future (BBCX).
What Are Time-Based Futures?
Click the futures tab on the top banner of the exchange to find BTSE’s futures products. The tabs for time-based futures products are located under the top banner, circled in red in the image above. Simply choose the asset and time period you desire to trade.
Time-based futures products have expiration dates, followed by settlement. Trading time-based futures basically means that you desire to speculate on the price of an asset within a given timeframe. Trading time-based futures allows you to speculate on the price of an underlying asset without buying the asset itself. All profit and loss are settled in any currencies that the user chooses, including BTC, USD fiat, or Tether.
For example, if you go long (buy) 1,000 Bitcoin monthly futures contracts at the beginning of November for $10,000 and hold those contracts through expiration at the end of the month, and the contract settles at $12,500 at expiration, then you will get paid out $2,500 in whatever settlement currency you choose.
BTSE has monthly and quarterly time-based futures. Monthly futures begin trading on the second to last Friday of the previous month and expires on the last Friday of each month. Quarterly contracts begin trading on the second to last Friday of the second month of the previous quarter and expires on the last Friday of the expiry quarter month.
It is important to note that time-based futures products sometimes have a tendency to trade at higher or lower prices than their underlying assets, growing closer to their underlying assets’ prices as time wages toward expiration. This difference is also known as the futures basis.
What Are Perpetual Futures?
Perpetual futures products on BTSE are also located under the top banner, circled in red above, visible after clicking the futures tab on the top banner.
Contrasting time-based futures, BTSE’s perpetual futures products have no expiration. Instead, these products have a funding period every eight hours which keeps futures prices close to the prices of their underlying assets.
Based on the price of the underlying asset comparative to its futures price during funding, traders holding long positions will pay a small fee to traders holding short positions (or vice versa), keeping futures trading prices close to their underlying assets’ prices.
So Why Not Just Trade The Underlying Assets?
Trading Bitcoin perpetual futures products are very similar to trading their respective underlying assets, except with the option to bet against the market (go short) and use leverage.
Both time-based and perpetual futures products allow you to use leverage. This means you can bet more per trade than you hold in your wallet.
These products also allow you to bet against the market. This is called shorting the market or going short. This involves borrowing futures contracts and selling them with the intention of buying them back at a cheaper price (if you are right regarding your speculation). This is all accomplished on the backend of the BTSE exchange platform.
Time-based Bitcoin futures products also tout leverage and short trading capabilities, but add in other variables, such as expiration and price difference (i.e. futures basis), providing a different trading experience than Bitcoin perpetual futures trading.