Where can Bitcoin futures be traded?

The Bitcoin futures market has experienced tremendous growth since its inception in the winter of 2017 on the Chicago Options Exchange (CFE). Although they pulled out of the Chicago market in 2019, many other exchanges have also witnessed this golden opportunity and are determined to take advantage of it.

Currently, hundreds of cryptocurrency derivatives exchanges around the world are offering Bitcoin futures , and the number is growing as new exchanges emerge. The introduction and acceptance of Bitcoin futures for many people plays an important role in Bitcoin legalization. Bitcoin is not only the most valuable, but also the most actively traded cryptocurrency. One of the great advantages of investing in Bitcoin futures is that they are based on the value of Bitcoin itself.

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Participation in Bitcoin Futures Market

The Bitcoin futures market is primarily used by investors who want to hedge the price of Bitcoin or those who do not own actual Bitcoin and want to profit from price speculation.
Hedging allows investors to protect their investments from falling futures prices based on the volatile nature of the Bitcoin spot market price. For example, let’s say an investor has an amount of Bitcoin that is equivalent to the value of $5,000. To be on the lookout for a market price decline, you can open a Bitcoin futures contract to sell your Bitcoin for $5,000 at any time in the future. Even if that time comes and the spot market drops in value of Bitcoin and hits $4,000, an investor can still sell for $5,000.

If you don’t own any bitcoins and want to profit from the starting price movements, cash payments are the best. When the Bitcoin futures contract is terminated, the proceeds will be received in fiat currency.

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Bitcoin Futures Payments

In the Bitcoin futures market, there are many entities that offer a variety of ways to settle Bitcoin futures after contract expiration. However, the two most common payment methods are cash and physical.
Of the two, cash payments prevail. Although the Bitcoin futures market is mostly used by investors hedging the price of Bitcoin without actually owning Bitcoin, most do not expect to physically move Bitcoin into their wallets.

Nevertheless, crypto derivatives exchanges (eg CME) have started offering Bitcoin futures physical trading services. Physical trading refers to the movement of bitcoins into an investor’s crypto wallet when the futures contract expires. This is a new method and aims to attract older bitcoin investors who have bitcoins in their wallets.

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Phemex Bitcoin Futures

Founded in 2019 by more than eight former Morgan Stanley executives, Phemex is the newest cryptocurrency derivatives exchange. Phemex advocates a “user-centric” approach. To date, it has set a new standard in the crypto industry with its features and amazing performance. Phemex allows you to trade contracts without collateral for crypto assets. In 2020, Phemex also plan to include derivatives of traditional financial instruments such as the S&P 500 index, interest rates, FOREX products, metals, energy and more.

Compared to BitMEX, deposits and withdrawals can only be made with Bits, and you can also leverage (up to x100) on the aforementioned products.

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Notable features of Phemex

The most innovative features of Phemex can be seen in the technical part: Phemex’s technical characteristics are similar to those of traditional financial exchanges, such as latency of less than 1ms, more than 300k transactions per second, and 99.9999% availability. In addition, Phemex supports the FIX API and sub-account, which are the most desired features by crypto users.

Security:
Since Phemex takes asset security very seriously, it has built its own tiered, deterministic cold wallet system. This ensures that each user is assigned an independent deposit address and all assets are safely stored in a cold wallet. Moreover, like BitMEX, the collection and movement of bits is done through offline signatures for strict human security.
Commission:
Phemex sets the fee as 0.015% of the designated price and 0.064% of the market price plus a platform fee of 0.05%, which is the same as the average value of the crypto industry.

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What are cryptocurrency derivatives?

Cryptocurrency derivatives, simply put, are where two or more parties derive value from an underlying asset through a financial contract. More specifically, a contract to buy or sell a specific asset: an asset, such as a stock or cryptocurrency, is purchased or sold at a fixed price at a specific time in the future. Derivatives by themselves have no intrinsic or direct value. The value of a derivative contract is based solely on the expected price movement of the underlying cryptocurrency.

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The three most popular types of derivatives

Swap:
A swap is an agreement between two parties to “swap” future cash flows. Typically, interest-bearing instruments such as loans, bonds or promissory notes are used as the underlying asset. An interest rate swap is the most common type of swap, in which two parties exchange future fixed rate flows and floating rate flows.
Futures:
A financial contract in which the buyer is obligated to purchase the asset or the seller is obligated to sell the asset. A futures product with a fixed price and a contract price.
Option:
A financial contract in which the buyer has the right (but not the obligation) to purchase the asset or the seller has the right (but not the obligation) to sell the asset.

Since the cryptocurrency derivatives market is still in its infancy, your options are extremely limited. The most popular derivatives in cryptocurrency are Bitcoin futures and options. This is because Bitcoin boasts the highest trading volume and importance in the world, controlling more than 50% of the entire cryptocurrency market.

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What are Bitcoin Options?

An option is a financial derivative that gives the owner the right (rather than the obligation) to buy or sell an asset at a specified price in the future. Options are commonly sold, especially in the currency and commodity markets, but you can also buy options on financial assets such as stocks, bonds, indices, and, more recently, Bitcoin.

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