what are crypto futures？
Introduction
If you want greater leverage and flexibility in the cryptocurrency market, then contract trading will be your ideal choice. Learn more about the principles, operations and risk management of cryptocurrency contract trading, compare contracts with spot trading, master leverage trading strategies, optimize your portfolio, and add a high-quality option to your cryptocurrency investment.
What is cryptocurrency contract trading?
Cryptocurrency contract trading is a financial derivative that allows traders to buy or sell a specific amount of cryptocurrency at a predetermined price on a specific date in the future. This trading method provides investors with opportunities to hedge risks, speculate and make profits, and discover prices. Unlike spot trading, contract trading does not require immediate possession of actual cryptocurrency assets, but rather trades through contracts.
Cryptocurrency contracts are usually traded on regulated exchanges with standardized terms, including contract size, expiration date, and settlement method. For example, a Bitcoin futures contract may represent 5 Bitcoins, expire 3 months later, and be settled in US dollar cash. This standardization makes the futures market highly liquid, allowing traders to enter and exit positions easily.
A key feature of futures trading is leverage. Traders only need to pay a small portion of the contract value as margin to control a larger position. For example, 10x leverage means that an investor can control a $10,000 Bitcoin futures contract with $1,000. This leverage effect can amplify potential gains, but it also increases risk.
What is the difference between cryptocurrency futures and spot trading?
There are significant differences between cryptocurrency futures and spot trading in several aspects:
| Features | Futures trading | Spot trading |
|---|---|---|
| Delivery time | Specific date in the future | Instant |
| Leverage | Usually high leverage | Usually no leverage or low leverage |
| Price volatility | May not be synchronized with spot prices | Directly reflects market supply and demand |
| Purpose of trading | Hedging, speculation, arbitrage | Mainly used for investment and payment |
| Ownership | Does not involve actual asset delivery | Direct ownership of cryptocurrency |
| Regulation | Usually more strictly regulated | Less regulated |
Contract trading allows traders to use higher leverage, which may bring greater potential returns, but also increases risks. Spot trading is more suitable for investors who hold and actually use cryptocurrencies for the long term.
Common types of cryptocurrency contracts
In the crypto market, contract types are divided into perpetual contracts and delivery contracts according to different time lengths.
According to the different calculation currencies, the contract types can be divided into USDT perpetual contracts with USDT as the settlement currency and BTC perpetual contracts with BTC as the settlement currency.
Perpetual Contracts
Gate.io perpetual contracts are a type of derivative used to invest in digital currencies, similar to traditional futures contracts. The biggest difference is that perpetual contracts do not have an expiration date or settlement date. Users only need to buy (long) or sell (short), which is more convenient to use and provides greater leverage than traditional futures contracts. Gate.io currently supports USDT perpetual and BTC perpetual contracts.
Delivery Contracts
Gate.io delivery contracts are also a type of derivative for investing in digital currencies. Delivery contracts are contracts to complete the purchase and sale of underlying assets at an agreed price on a future delivery date (week, next week, quarter). It is different from perpetual contracts in that delivery contracts have a delivery date (that is, the contract will expire). When a delivery contract expires, both the buyer and seller of the contract are obliged to fulfill the contract and complete the delivery.
What is the difference between a perpetual contract and a delivery contract?
| Perpetual contract | Delivery contract | |
|---|---|---|
| Delivery time | No delivery date, long-term holding | Delivery at maturity |
| Price mechanism | Anchoring the spot market price, introducing the spot index price | Based on the current price of the platform |
| Liquidation sharing method | Automatic reduction of positions, insurance fund | Profitable users share the liquidation loss + insurance fund |
| Funding fee | Holding positions will incur funding fees | No funding fees |
| Applicable groups | Ordinary investors | Institutions and large investors |
How to choose the right cryptocurrency contract exchange?
Choosing the right cryptocurrency futures exchange is crucial for successful trading. Investors should consider the following key factors:
Security is the primary consideration. High-quality exchanges should adopt a storage method that combines cold and hot wallets, and implement security measures such as multi-signature and multi-factor authentication. For example, Gate.io uses industry-leading security protocols to ensure the safety of user funds.
Liquidity is another important indicator. High liquidity means it is easier to trade large amounts at a reasonable price. Exchanges with high trading volumes generally offer better liquidity.
Trading fees directly affect the profitability of trading. The fee structure of different exchanges can vary greatly, with some adopting a tiered rate, where the higher the trading volume, the lower the rate. Investors should carefully compare the fee structures of different platforms.
Product diversity is also an important consideration. High-quality exchanges should offer futures contracts for a variety of cryptocurrencies, including mainstream currencies and emerging tokens. In addition, different types of futures products such as perpetual contracts and delivery contracts should also be complete.
Finally, the quality of user experience and customer support cannot be ignored. Intuitive interface design, fast order ution, and 24/7 customer service are all signs of high-quality exchanges. Some leading exchanges provide 24/7 customer support to ensure that users can get help at any time.
Conclusion
Cryptocurrency futures trading opens up new opportunities for investors and provides flexible risk management and investment strategies. High leverage brings high returns but also high risks. It is crucial to choose the right exchange and strategy. Whether it is trend tracking, arbitrage or hedging, successful traders need to carefully manage risks and use leverage reasonably. As the market continues to develop, cryptocurrency futures will continue to attract more investors’ attention and participation.
Risk warning: The cryptocurrency market is highly volatile, and changes in regulatory policies may lead to sudden changes in futures trading conditions. Investors should carefully assess their risk tolerance.
