What Are Cryptocurrency Futures and How Can Users Trade Them?
As Bitcoin leads the cryptocurrency market towards adoption, more assets and tools are being created to help users expand their reach in innovative technology. Nowadays, portfolio diversification is more approachable considering the varied array of cryptocurrencies, from stablecoins and altcoins to meme coins and gaming tokens.
Bitcoin helped build this vast pool of financial tools by enhancing developers’ solutions on diverse issues. For example, altcoins emerged as Bitcoin prices rose and network congestion increased, yet this did not undermine their value over time. This was also the case with BTC futures, first introduced on the market in 2017, which have simplified the process of investing in Bitcoin and are safer due to their positions and price limits.
BTC futures contracts are regulated by the CFTC (Commodity Futures Trading Commission), which is setting the stage for more assets to be transformed into futures, such as Ethereum. But what exactly are these assets, and why are they so popular? Let’s find out.
Crypto Futures Are Financial Contracts
Cryptocurrency futures allow users to buy or sell any amount of digital assets at a set price in the future. They provide exposure to the crypto market without the need to own crypto, which benefits users concerned about high volatility. In addition, traders can leverage crypto futures on regulated exchanges, which reduces the risk of massive losses.
The CME (Chicago Mercantile Exchange) Group and CBOE (Chicago Board Options Exchange) are the main exchange operators through which users can trade crypto futures. The CME, for example, supports BTC and Ether futures based on the benchmarks of the CME CF Bitcoin Reference Rate and the CME CF Ether Reference Rate.
Crypto Futures Are Considerably Advantageous
Traders and investors choose these financial tools to diversify their portfolios and gain exposure to more markets. But that’s not everything that futures provide, as they also secure:
- A simple investment process that doesn’t require a Bitcoin wallet and supports cash-settled contracts;
- More security than regular cryptocurrencies thanks to positions and price limits that limit risk exposure;
- Different position limits between exchanges that can be reconfigured based on trading history and margins;
There’s also more than one type of Bitcoin contract that users can take advantage of. The full-size contract includes 5 BTC, while the micro contract on CME is part of a special suite that contains 0.1 BTC, making trading more accessible.
The Main Use Cases for Crypto Futures
Crypto futures are efficient for hedging and speculation. In most cases, traders leverage them to speculate on price movements, while businesses and investors use them as a hedge against volatility. Speculating allows users to profit from expectations of price movements, especially when they’re tied to factors like market sentiment and regulatory changes. Unfortunately, when these forecasts are incorrect, users can lose money.
Hedging, on the other hand, provides greater control over navigating price fluctuations. Companies mainly use crypto futures to protect their portfolios against potential declines, while also buying crypto and futures to hedge against future price increases.
Still, They Carry Risks
Crypto futures have been widely appreciated for their market value, especially because they’re reasonably liquid. Therefore, users can open and close positions quickly, as well as buy and sell them to protect or diversify crypto portfolios.
However, traders must be wary of the potential risks, including volatility. Since we’re talking about cryptocurrencies, it’s no wonder prices can experience sudden price swings, even if part of their technology secures a less extreme volatility.
In addition, crypto futures trade on margin, which is a double-edged sword. On the one hand, this gives the trader the option to deposit only a part of the contract’s value to stabilize the position. Given the diverse margin requirements across exchanges, traders might lose more than they win.
Other Valuable Types of Futures
While Bitcoin futures set the tone for the crypto market, other assets closely followed, securing regulatory approval to operate and support people’s financial advancement as financial tools. Ether futures are an asset offered by the CME Group, with a contract size of 50 Ether. Therefore, one Ethereum contract would be its current price multiplied by 50.
Solana futures are sized at 500 coins, so the price of one Solana contract would be multiplied by 500. Finally, XRP future contracts are priced at 50,000 XRP. All of these contracts have monthly expirations and micro-options for those who are just beginning to trade or invest.
For 2026 trading, the CME Group plans to make futures contracts available 24/7, given how demand accelerated in the past year. Currently, users can trade these assets almost 24 hours per day, Sunday through Friday, with as much flexibility as available.
What About Cryptocurrency Futures Options?
Options are another type of futures contract for cryptocurrencies, with the main difference being the obligation to purchase. When traders choose futures, they must buy or sell the asset at the specified date and price, regardless of the advantages or disadvantages it offers. On the other hand, options allow users the freedom to do the same, so they have the right but not the obligation to do so.
Options also divide into call and put options. For example, traders purchase call options when they forecast prices to increase, or put options when they forecast prices to decline. Timing is most important in this case because gains and losses differ depending on whether the contract is unlimited or limited by the premium paid. Regardless, the volatility of cryptocurrencies makes it risky for users to trade options, and this applies to futures as well, so practicing patience and due diligence is best.
Conclusion
Cryptocurrency futures are among the latest developments in the world of cryptocurrency, allowing users to take advantage of prices without owning the underlying assets. Once BTC futures contracts were certified on a secure exchange, Ethereum, Solana, and XRP soon followed, strengthening diversification and laying the groundwork for an innovative market. These assets offer benefits like liquidity but still carry volatility risks. Therefore, users must be careful when investing or trading and explore other assets, such as options contracts.