Explore Crypto Futures Trading

Leverage

Generally, a cryptocurrency is bought with zero leverage. As an example, if Bitcoin is selling for $25,000, it will cost you $25,000 to purchase. With futures, you can often put up less than 5% of the overall value to control a larger position in a cryptocurrency futures such as Micro Bitcoin futures. Leverage allows for potentially greater profits but, of course, with greater opportunity comes increased risk and the potential for large losses. Make sure you always have a risk management plan in place when trading leveraged futures.

Easily go short on crypto

When buying a cryptocurrency, your only real option is to hold or sell. This isn’t really trading. If you think the price of Bitcoin is going to decline, there is no real way to profit from that idea... except through crypto futures. For futures traders, entering a short position in Bitcoin or Ethereum is seamless, and every future can be shorted for any number of contracts and at any time.

Regulated Markets And Trading Environment

While the cryptocurrency marketplace is fragmented across various unregulated exchanges with limited market transparency, futures trading is highly regulated by the Commodities Futures Trading Commission (CFTC). Futures exchanges, such as CME Group, serve as the clearing house for all trades, set the rules for margin and contract specifications and match and guarantee all transactions. Additionally, Futures Commission Merchants are required to maintain all customer funds in a segregated account to protect customer assets.

Virtual 24-Hour Trading

Although both futures and cryptocurrencies offer nearly around the clock market access, futures are known for usually having higher levels of liquidity and trading volume, which makes entering and exiting trades easier. When buying crypto, a lack of liquidity can increase the bid and ask spread which can add a significant cost to the transaction. When added with other transaction fees, the cost of buying and selling cryptocurrencies can escalate quickly.

Diversification

A key component of any successful trading strategy is the ability to diversify risk across a variety of assets to help reduce the impact of any single market movement on your account equity. When trading futures, there are dozens of uncorrelated products to trade including commodities, financial instruments including some cryptocurrencies and more. In contrast, while there are thousands of cryptocurrencies available, many are highly correlated. This means that they often move in tandem with one another limiting the ability to truly diversify.

Tax Advantages

The taxation and reporting of cryptocurrency transactions can be daunting and complex. Some common tax challenges include tracking gains and losses on every transaction, determining fair market value for tax reporting purposes and the lack of clear guidance from tax authorities. Alternatively, one of the most substantial benefits of trading futures are the clear and established tax rules. While crypto trading is taxed at 100% short-term gains, all futures profits are taxed using a 60/40 rule: 60% of gains are taxed as long-term gains and 40% are taxed as short-term gains. Be sure to consult your tax advisor for more information.

Bitcoin was primarily created as an alternative to traditional currencies to provide a decentralized environment for transactions. Since the number of Bitcoins is capped at 21 million, it's also considered an alternative way to store value.

Ether is the cryptocurrency that powers and facilitates operations within the Ethereum network—a digital platform for blockchain development and innovation that allows for electronic decentralized smart contracts.