Bitcoin Futures: Advantages Over Holding Actual Bitcoin?

By NinjaTrader Team

Bitcoin was the first and most well-known cryptocurrency, designed to provide a secure, transparent, decentralized, peer-to-peer digital currency apart from the international banking system. Created in 2009, Bitcoin utilizes blockchain technology to record transactions across a network of computers. 

Bitcoin is created through a mining process where transactions are verified and added to the public ledger, known as the blockchain. Miners use specialized hardware to solve complex mathematical problems, and the first miner to solve the problem gets to add a new block to the blockchain and is rewarded with Bitcoins. This process not only validates transactions but also secures the network and introduces new Bitcoins into circulation, following a predetermined rate. 

Approximately every four years, Bitcoin “halving” occurs, with the next event coming up on April 19, 2024. During halving, the reward for mining new blocks is halved, thus reducing the rate at which new Bitcoins are generated. Built into Bitcoin's code, this mechanism effectively limits the total supply of Bitcoin to 21 million. For miners, halving can lead to increased competition and potentially higher transaction fees, as the Bitcoin mining reward decreases but can also lead to a rise in Bitcoin's value if demand remains strong due to increased scarcity. 

With easy access to Bitcoin through ETFs and futures, more traders and investors are discovering the advantages of these new instruments over holding actual Bitcoin. Futures provide traders with more flexibility, with the ability to go long and short easily virtual 24 hours a day, and Micro Bitcoin futures provide a low cost to entry for traders of all account sizes. 

In this week’s segment of Let’s Talk Futures, CME Group Chief Economist Erik Norland examined the history of Bitcoin along with the underlying technology that can drive Bitcoin prices, including how Bitcoin is mined and the upcoming halving event. Erik also discussed why more traders and investors are adapting Bitcoin and the advantages of holding Bitcoin futures over actual Bitcoin.

Additional topics discussed in this free livestream:

  • Brief history of Bitcoin

  • What is Bitcoin mining?

  • How does the upcoming halving affect Bitcoin miners?

  • Why are more traders adopting Bitcoin futures?

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