By now, the term bitcoin is familiar to a considerable number of people. Some have only heard of it, some know it’s a cryptocurrency or a digital currency, whichever name they chose to use.
According to bitcoin.org. Bitcoin as a technology, is a protocol that has a strong security track record and the underlying bitcoin network is the biggest distributed computing project in the world today. The network’s most common vulnerability is user error.
Wallet files storing the necessary private keys can be lost, stolen and deleted accidentally, something common and familiar with regular cash in the digital form. However, unlike the common form, users of cryptocurrency can employ security practices and even use credible service providers to protect their assets from being stolen.
Now, most users are familiar with bitcoin cash, the product from the fork of the original bitcoin. As to the definition of bitcoin cash and the differences with the original bitcoin, that is not the subject matter of this piece today. We explore a different kind. We clarify what bitcoin futures are
Understanding The Term Futures
It’s the term given to the purchase process that will take place in the future. It is basically the agreement between two parties to buy or sell a commodity for a specific agreed price. The deal takes place on a specific day in future.
When the contract expires, both parties must trade at the price that has been agreed upon regardless of the price of the asset. It doesn’t matter whether it has fluctuated over time. Once the time contract expires, the deal has to be made
Bitcoin futures make profit when people speculate the price movements of the underlying assets. They also hedge against the risk of fluctuations in price. It helps when the asset price is volatile. The regulation of bitcoin future contracts requires specialized exchanges.
From the definition above, bitcoin futures is therefore not a coin derived from the original bitcoin. It’s a type of contract for trading bitcoin.
What Are Bitcoin Futures
The term futures in the crypto venue shouldn’t necessarily involve commodities, rather can be based on financial instruments.
Bitcoin future contracts speculate on the price of bitcoin in the future and doesn’t even require the obtaining of bitcoin itself. It works in the same exact way as futures on traditional investment assets.
If you expect the price of bitcoin to rise, you can take a long position. If you own the currency, you could take a short position in an effort to mitigate the impact of any losses that might occur.
A kind of guarantee emits in the minds of traders; that bitcoin future can be traded on specific regulated exchanges. However, just like any instrument in trade, there also exists a risk to some extent.
Common large trading exchange rather set high market entry barriers to attract high end opulent individuals and institutional investors. The future price is based on BRR (Bitcoin Reference Rate). It is the aggregated rate across major bitcoin exchange spots between 3pm and 4pm London time. No real bitcoins are involved as they are financially settled and traders can profit from price movements minus the asset