Bitcoin Futures – All you need to know
For the second time in the last week, the price of Bitcoins fell way below the $6000 mark. Bitcoins have been consistently running low in the market and have not seen any significant jump in its value in quite a long while. Moreover, you could even say that the Bitcoin market is falling. That being said, the fall down below the $6000 mark occured right when Bitcoin Futures brought a halt to their trading for the month. Not just Bitcoins, even other major digital currencies like Ripple and Ethereum went down a little more than their usual ups and downs.
Over time the Bitcoin Futures trading periods have come out as a remarkable metric against which market sentiment can be assessed and measured.
The price of Bitcoin had almost all reached the $20000 mark and the moment the futures market, Bitcoin Futures went live, the price fell way down below $6000 which is quit a fall and frankly, quite rapid even for a volatile currency like Bitcoin. The day before its launch, Bitcoin was at its peak, but the day the futures market, Bitcoin Futures went finally still, Bitcoin prices hit an all time low.
Chicago Mercantile Exchange
It was the Chicago Mercantile Exchange or the CME that introduced this futures market called Bitcoin Futures. The CME Group is one of the most popular and leading and most diverse derivatives marketplace in the world. The CME Group consists of four Designated Contract Markets. It is where the world comes to manage risks.
The Bitcoin Futures enables it users to hedge Bitcoin exposure or harness the performance of these Bitcoin tokens with a futures product. This product has been developed by the one of the largest derivatives marketplace in the world called the CME Group as mentioned above.
What is it? – Bitcoin Futures
Bitcoin Futures offer several benefits to its users. When you use something like this, you receive a fast and very cost effective way to trade assets in the financial and commodity markets. Bitcoin Futures are contracts which have been standardised to buy or sell some assets by already setting its price, setting a date in the future when the transaction would be made, and also is set the quantity of the asset and its quality. This kind of a future set up is mostly used to seek profits in the future in a rapidly changing market and to also reduce risk exposure to the bare minimum. It is mostly the hedgers and speculators who use the Bitcoin Futures market, or any other futures market for that matter.
Benefits of Bitcoin Futures
When you use Futures trading, you receive a 24×7 facility to access the market floors. 6 days a week, you receive 24 hour access to the market when all other markets are accessible only during a certain duration of time in a full day. This Bitcoin Futures market also provides deep liquidity. A market is priced tighter and has lower costs along with a very very efficient trading system only when the user participation in that market is significantly high. The Bitcoin Futures market also fosters true price discovery thus making everything much more transparent and clear for everyone.
It also provides more leverage to its users. It gives more power to your capital since even a large contract value can be controlled with quite a smaller margin. Moreover, it also gives its users the ease of going short.
There is no annual management fees required and the potential cost efficiencies have spectacularly lower fees. The Bitcoin Futures market is designed in such a way that it tightly tracks underlying thus giving it pure price exposure. Not only this, it also offers a portfolio diversification. There is no ownership and one can only access value of commodity. Of course the Bitcoin Futures market does have tax efficiencies where 60% of it is long term, and 40% of it is short term.
The Bitcoins Futures market has severely affected the price of Bitcoins and no one knows if Bitcoin will ever be able to make a comeback or not. The financial and economic markets are still a little unripe for all this, and once prices settle down and there is less volatility risk, maybe the scenario would change.