Home Cryptocurrency Cryptocurrency: The future of futures?

Cryptocurrency: The future of futures?

by Gordon James

The future of the economy? What’s that? The future of Finance? No, the future of Cryptocurrency. The future of Futures? No, the future of Cryptocurrency. The future of money? No, the future of Cryptocurrency. The future of trusts? No, the future of Cryptocurrency. The future of regulation? No, the future of Cryptocurrency. The future of futures is Cryptocurrency.

Bitcoins are becoming a more common part of life, whether you want to invest in it or just try to keep up with everything that is going on in the world of cryptocurrency investing.

Cryptocurrency? What the heck is that? It’s a hot topic right now, and you probably know somebody who can’t get enough of it. Last week, a pair of guests were asking about another cryptocurrency idea that also seems to be taking off: They’re talking about futures trading of future cryptocurrency. So, “futures trading” of cryptocurrency sounds like a pretty technical (and potentially lucrative) subject.. Read more about future of cryptocurrency 2020 and let us know what you think.

Many traders who come to cryptocurrency markets after working in traditional financial markets see derivatives as price speculation and hedging tools. There are many opportunities for exchanges and tools. However, traders should keep in mind some key differences between crypto futures and traditional futures before venturing into this growing market.

On topic: 3 things every crypto trader should know about derivatives exchanges

Miscellaneous tools

Traders moving into cryptocurrencies from traditional markets are used to futures contracts with a fixed date. Although fixed-term contracts can be found in cryptocurrency markets, a significant portion of cryptocurrency futures trading is done in open-end contracts, also known as open-end swaps. This type of futures contract has no fixed expiration date, meaning that the trader can keep a position open indefinitely.

Exchanges that offer open-ended contracts use a mechanism known as the funding rate to periodically equalize price differences between the contract markets and cash prices. When the funding rate is positive, the price of the perpetual contract is higher than the spot rate – long positions pay for short positions. Conversely, a negative financing rate means that short positions are paid for by long positions.

Moreover, traders who have switched from traditional finance to cryptocurrencies can get used to moving their positions to different exchanges. Exchanges for cryptocurrencies, on the other hand, typically operate as walled gardens, meaning derivative contracts cannot be transferred between platforms.

Related: Professional traders need one global crypto, not hundreds of lakes

Regulated and non-regulated trading venues

The majority of cryptocurrency futures trading – some 85-90% – is still unregulated. This is largely due to the fact that cryptocurrency futures markets emerged at a time when regulators were still grappling with the more fundamental issues surrounding the legal status of digital assets. BitMEX has paved the way for futures trading in cryptocurrencies by using margin contracts and token guarantees. In this way, the company avoided the legal requirements for electric ramps. There are currently about a dozen major trading platforms, but only a small number of them have regulated status.

The Chicago Mercantile Exchange (CME) and Bakkt are both regulated by the Commodity Futures Trading Commission (CFTC) in the United States. In Europe, Kraken Futures operates under a multilateral trading facility licence issued by the UK Financial Services Authority. In Switzerland, Vontobel and Leonteq offer mini-bitcoin futures through the SIX Swiss Exchange.

Regulations may prohibit traders from certain countries from participating in trading on unregulated platforms. This is particularly relevant in the US, where exchanges are paying attention to the fact that the CFTC is now suing BitMEX for violating anti-money laundering rules and the Bank Secrecy Act.

However, regulated cryptocurrency futures platforms in the US have expanded their instrument offerings beyond pure bitcoin futures (BTC), likely in response to growing demand. The CME, for example, recently went beyond bitcoin futures and options to offer Ether (ETH) futures. In addition, Bakkt also offers bitcoin futures and monthly options.

Unregulated platforms offer open futures and swaps on a wider range of altcoins, but only for traders in countries where they are licensed. In any case, the main liquidity remains concentrated in BTC and ETH futures, at least for now.

Operational impact

Differences in the regulatory framework, combined with the way open contracts are managed, result in a number of practical differences between crypto futures and traditional futures. In the absence of a clearing system with a central counterparty, exchanges are exposed to high risks, especially since many of them offer high leverage (leverage), up to 125 times. Therefore, unprofitable positions that reach the maintenance margin are liquidated.

Exchanges typically transfer liquidation profits to an insurance fund, which is designed to protect traders’ profits if their counterparty does not have sufficient margin to cover a transaction. The availability and relative health of the insurance fund is a critical factor in using an unregulated exchange. Without funds, or if the fund becomes too small to cover losses due to liquidation, profitable traders risk having their positions automatically cancelled by the exchange.

Another important operational aspect is the downtime of the exchange. Many unregulated platforms have been known to experience server crashes during periods of high volatility, preventing traders from liquidating their positions until liquidation. Therefore, before opening an account, it is advisable to study the downtime of the platform.

Low access thresholds

Futures markets for cryptocurrencies typically have very low barriers to entry. A trader can open an account, go through the client identification process, deposit funds and start trading within minutes.

In contrast, barriers to entry for exchange-traded futures are high because of the size of the contracts, which are designed for institutional traders. This is also reflected in the regulated supply of futures on cryptocurrencies. On CME and Bakkt, two regulated trading venues for futures on cryptocurrencies, the contract size is 5 BTC and 1 BTC respectively. With a current price of over $31,000, these contracts are clearly reserved for those willing to make a significant investment.

However, Blockchain offers significant potential to transform futures markets beyond cryptocurrencies via asset tokenization. Let’s assume a Nasdaq 100 or S&P 500 futures contract is tokenized. They can then be traded in fractions, lowering barriers to entry and introducing new sources of liquidity to traditional markets.

Related: Understanding the systemic transition from digitization to tokenization of financial services.

Such a scenario may be beneficial to those who wish to add finer diversification to their portfolios, which is currently only possible through contracts for difference (CFDs). Although CFDs play a similar role in the financial markets, they are only available through brokers, which limits transparency for the trader. It also fragments the liquidity available in the broader markets.

Despite this rapid growth, cryptocurrency futures markets are still in their infancy, mainly because institutional inflows of cryptocurrencies have only just begun. As markets evolve, new and more sophisticated tools are likely to emerge and the lines between traditional and digital finance will blur. In addition, it seems likely that the regulatory environment will change with the influx of new funds. One thing is certain: Futures in cryptocurrencies have a long future ahead of them.

This article contains no investment advice or recommendations. Any investment or business transaction involves risk, and readers should do their own research before making a decision.

The views, thoughts and opinions expressed herein are those of the author and do not necessarily reflect or represent those of Cointelegraph.

Andy Fluri is a serial entrepreneur and a quantitative trading expert. Andy is a former pilot in the Swiss Air Force and has led projects for the Swiss Secret Service and several major banks. He has also worked as a senior project manager and software architect at Siemens Schweiz AG. In 2010, Andy became a partner and head of algorithmic trading at Linard Capital AG, a Swiss quantitative hedge fund. Andy holds a master’s degree in industrial management and industrial engineering from the Technical University of Zurich and an executive MBA from the University of St. Petersburg.If you want to be the change you want to see in the world, then start investing today. Cryptocurrency is a digital currency that is free from government interference, government control, and government manipulation. Cryptocurrency is a digital currency that is free from government interference, government control, and government manipulation. The future of cryptocurrency is bright, and hopefully, it will lead the way to financial freedom from the government, banks, and fiat currency.. Read more about bitcoin future price and let us know what you think.

Frequently Asked Questions

Is Cryptocurrency a good investment 2020?

The answer to this question depends on the person asking it. Some people might say that cryptocurrency is a good investment because it is a new and emerging technology. Other people might say that cryptocurrency is a bad investment because it is not a good store of value. Cryptocurrency is a good investment for some people and a bad investment for others.

What crypto will explode in 2020?

The best answer is Bitcoin.

Which Cryptocurrency should I invest in 2021?

The best cryptocurrency to invest in in 2021 is Monero. Monero is an open-source, privacy-focused cryptocurrency that is focused on scalability and decentralization. Monero is the most popular cryptocurrency in the dark web and is one of the most popular cryptocurrencies in the world. Monero is the best cryptocurrency to invest in in 2021 because it has a strong community of developers and miners, and it has a strong and

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