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Why Trade Bitcoin Futures vs the Spot Market?

Bitcoin futures (BTC) and Micro Bitcoin futures (MBT) allow traders to speculate on the price of Bitcoin without having to buy or sell the underlying cryptocurrency itself, known as the “spot” currency. The easy-to-access futures marketplace provides several distinct benefits versus actually owning the digital coin.

See why traders are choosing Bitcoin futures in this 3-minute video:

Key Advantages of CME Bitcoin Futures

Launched in 2017 by the CME Group, Bitcoin futures have changed the landscape and perception of cryptocurrency. Providing a marketplace to participate in Bitcoin price action without owning the underlying currency, BTC futures & options on futures can offer distinct advantages to traders.

  • Easy Access: Trading Bitcoin futures (BTC) affords the same ease-of-access as other derivative products from the CME. Existing futures traders can seamlessly start trading Bitcoin futures and new traders can open a futures trading account with a minimum investment including only $400 with NinjaTrader Brokerage.
  • Trade Both Sides of the Market: Active traders who frequently day trade and swing trade can particularly benefit from BTC since it can be traded long or short without restriction. Bitcoin spot can only be traded on the long side meaning investors can only bet on a rise in the currency’s value.
  • Regulated marketplace: With regulatory oversight by the Commodity Futures Trading Commission (CFTC), Bitcoin derivatives traders have the reassurance of trading on a regulated exchange.*

The chart above shows weekly price action in BTC futures over the past 18 months. From the relative low of 4985 in March of 2020, BTC has since rallied back and now hovers around a resistance area from June 2019. A 50 and 200-day simple moving average have been applied to the chart for further analysis.

Challenges of Spot Bitcoin

In contrast, traders looking to start trading actual Bitcoin, or “Bitcoin spot,” face some unique challenges.

  • More Homework Required: In order to start trading Bitcoin spot, investors must first set up a digital wallet with online platforms such as Coinbase or Kracken. This process can be difficult for the non tech-savvy or those unfamiliar with the crypto landscape.
  • Account Security Concerns: Web-based cryptocurrency exchanges are potentially more susceptible to technical errors and security concerns than well-established & regulated financial hubs such as the Chicago Mercantile Exchange.
  • Tax Challenges: Due to the nature of cryptocurrency and how it is treated for tax purposes, complications can arise when processing taxes on crypto gains & losses.

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* Although CME Bitcoin futures & options are subject to regulatory oversight, the underlying Bitcoin digital currency is unregulated and can therefore impact the Bitcoin futures market.

This article is intended for educational and informational purposes only and should not be viewed as a solicitation or recommendation of any product, service or trading strategy. It includes content from independent persons or companies that are in no manner affiliated with NinjaTrader Group (NTG) or any if its affiliates. The content and opinions expressed in this article do not necessarily reflect the official policy or position of NinjaTrader or any of its affiliates.

NinjaTrader Brokerage IS A MEMBER OF NFA AND IS SUBJECT TO NFA’S REGULATORY OVERSIGHT AND EXAMINATIONS. HOWEVER, YOU SHOULD BE AWARE THAT NFA DOES NOT HAVE REGULATORY OVERSIGHT AUTHORITY OVER UNDERLYING OR SPOT VIRTUAL CURRENCY PRODUCTS OR TRANSACTIONS OR VIRTUAL CURRENCY EXCHANGES, CUSTODIANS OR MARKETS.

View NFA & CFTC advisories as they contain more information on the risks associated with trading virtual currencies.