Coinbase and Trading Technologies to Launch a Bitcoin Futures Platform
One of the most significant crypto-currency exchanges is set to join hands with a Chicago-based tech firm to come up with a bitcoin and futures platform. Coinbase expects to make the launch in March with partnership from Trading Technologies International. The tech firm provides tech solutions for financial institutions and this venture will allow users to trade cash against futures in other crypto markets.
What Are Bitcoin Futures?
With blockchain relatively new to us, futures are also not recognized. A future is a contract that allows exchange of an asset between two parties at a predetermined date at a certain price. One side is the short place, and the other takes the long side.In trader speak, the short place is the party who predicts the agreed price to fall below with the long predicting a rise above the estimate.
Let's say, I buy a future contract of an amount of bitcoin and anticipate the price to be at a number after a particular point in time. I can place a wager as a future contract which upon expiry you get rewarded if your outcome happens to be true.
Each futures contract has a specific clause for the type of commodity, financial instrument, expiration date, and price. On the other hand, most futures contracts have cash settlement and end without the physical delivery of the item. The futures market works more like a centralized marketplace for traders looking to trade futures contracts at more convenient trade execution speeds.
Why You Should Care
For starters positioning bitcoin and futures will give traders a chance to bet on spot prices. Consequently, it creates more way for people to earn from bitcoin just from predicting the prices. This is a potential market especially with the rise and fall of cryptocurrency prices.
Additionally, the futures market can end up becoming more extensive than the bitcoin markets. A direct attribute is the number of institutional investors willing to finance through futures markets. The bitcoin market is made up of most retailers and highly volatile, making organizations fearful of investing in bitcoin. With the futures markets, size and liquidity is an added advantage that assures investors of their finances.
Lastly, this would be a great way to establish trade deals. If you make a future contract on an asset to a later date can save you a lot of cash and end up paying less than the item current price.
Good or Bad
A positive element of the futures markets is the settlement scheme. Although similar to the stock markets, futures market allows daily settlements on your predicted positions. This means that all profit and losses are deducted or credited to your account at the end of the day's trading session. The level of your gains and losses will depend on the price fluctuation of the particular contract on the market.
However, there is also a downside to the new venture. Most institutional investors are wary of the prospects of bitcoin. Eventually, most of them might move onto futures markets, which might spell doom for the cryptocurrency. Additionally, prices in the futures market are open to many factors such as politics, economy, and trade deals.