{"id":164611,"date":"2023-09-28T21:22:43","date_gmt":"2023-09-28T15:52:43","guid":{"rendered":"https:\/\/dripp.zone\/news\/?p=164611"},"modified":"2023-09-28T21:22:43","modified_gmt":"2023-09-28T15:52:43","slug":"what-are-crypto-futures-coinbases-latest-offering-crypto-news","status":"publish","type":"post","link":"https:\/\/dripp.zone\/news\/what-are-crypto-futures-coinbases-latest-offering-crypto-news\/","title":{"rendered":"What Are Crypto Futures, Coinbase&#8217;s Latest Offering? &#8211; Crypto News"},"content":{"rendered":"<div style=\"position:relative;overflow:visible;font-size:1.2em;line-height:1.58\">\n<div class=\"pt-8 pb-10 border-t border-b border-decryptGridline \">\n<h4 class=\"sc-2ed2039d-4 gGjXIA gg-dark:text-white\">In brief<\/h4>\n<ul>\n<li class=\"font-meta-serif-pro font-normal text-lg md:text-xl md:leading-9 tracking-px text-body gg-dark:text-neutral-100\">A futures contract is an agreement that obligates a trader to buy or sell an asset at a specific time, quantity and price.<\/li>\n<li class=\"font-meta-serif-pro font-normal text-lg md:text-xl md:leading-9 tracking-px text-body gg-dark:text-neutral-100\">Bitcoin futures help to bring in additional liquidity to the market and also provide opportunities for arbitrage.<\/li>\n<li class=\"font-meta-serif-pro font-normal text-lg md:text-xl md:leading-9 tracking-px text-body gg-dark:text-neutral-100\">As the trading value of Bitcoin varies, so too will the value of different Bitcoin futures contracts.<\/li>\n<\/ul>\n<\/div>\n<p class=\"font-meta-serif-pro scene:font-noto-sans scene:text-base scene:md:text-lg font-normal text-lg md:text-xl md:leading-9 tracking-px text-body gg-dark:text-neutral-100\"><span style=\"font-weight:400\"><span class=\"link\"><a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/decrypt.co\/46690\/coinbase-review-a-great-jumping-on-point-for-bitcoin-beginners\" class=\"sc-adb616fe-0 ePvUAp\">Coinbase<\/a><\/span> announced on September 28, 2023 that it plans to launch its regulated perpetual futures contracts on its <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/decrypt.co\/103611\/coinbase-to-phase-out-trader-friendly-pro-exchange\" class=\"sc-adb616fe-0 ePvUAp\">Coinbase Advanced<\/a> platform (initially for non-US customers). Why futures? Partly because they offer investors a way of potentially taking advantage of the high volatility of most crypto. Let&#8217;s use Bitcoin as an example.\u00a0<\/span><\/p>\n<p class=\"font-meta-serif-pro scene:font-noto-sans scene:text-base scene:md:text-lg font-normal text-lg md:text-xl md:leading-9 tracking-px text-body gg-dark:text-neutral-100\"><span style=\"font-weight:400\">Spot trading\u2014the practice of buying and selling <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/decrypt.co\/?post_type=post&amp;p=5736\" class=\"sc-adb616fe-0 ePvUAp\"><span class=\"sc-4095e4f9-4 bBrSlx\">Bitcoin<\/span><\/a>\u2014forces traders to exchange cryptocurrencies at their <\/span><i><span style=\"font-weight:400\">current <\/span><\/i><span style=\"font-weight:400\">prices. But what if there was a way to lock in that price of $4,000, picking up the Bitcoin a couple of months later? So even if Bitcoin\u2019s price hit $12,000, the counterparty would have to deliver the Bitcoin purchase with $4,000.<\/span><\/p>\n<p class=\"font-meta-serif-pro scene:font-noto-sans scene:text-base scene:md:text-lg font-normal text-lg md:text-xl md:leading-9 tracking-px text-body gg-dark:text-neutral-100\"><span style=\"font-weight:400\">There is! It\u2019s called a futures contract. A futures contract is an agreement between two traders that obligates a trader to buy or sell an asset at a specific time, quantity and price. For example, you might enter an agreement in mid-March to buy one Bitcoin for $4,000 for August 30. You could also be on the other side of the deal, agreeing to selling a Bitcoin for a fixed price. If you\u2019re a buyer, you want the trading price of Bitcoin to go up, as you will be able to buy the cryptocurrency at below market value, while sellers want the opposite, profiting if Bitcoin were to decrease in price.<\/span><\/p>\n<h2 class=\"sc-2ed2039d-2 hmmXcn gg-dark:text-white scene:font-itc-avant-garde-gothic-pro scene:font-light\" style=\"margin-top:2em;text-align:left;padding-bottom:16px;margin-bottom:16px;border-bottom:1px solid #dfe2e4\">Futures contracts and the evolution of asset classes<\/h2>\n<p class=\"font-meta-serif-pro scene:font-noto-sans scene:text-base scene:md:text-lg font-normal text-lg md:text-xl md:leading-9 tracking-px text-body gg-dark:text-neutral-100\"><span style=\"font-weight:400\">&#8220;Futures are an important part of the evolution of asset classes,&#8221; Nick Cowan, CEO of the <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.gsxgroup.global\/\" class=\"sc-adb616fe-0 ePvUAp\">GSX Group<\/a>, told <i>Decrypt<\/i>. &#8220;They provide a benchmark\u2014a Fair Value, or FV\u2014of what the future value is, allowing arbitrage and liquidity to enter the market.&#8221;<\/span><\/p>\n<div class=\"w-full min-w-full my-4 p-6 rounded bg-[#F2F5F8] border border-black\/[.08]\">\n<h4 class=\"mb-4 scene:font-itc-avant-garde-gothic-pro font-akzidenz-grotesk font-bold text-xs md:text-base text-decryptBlack leading-1\">Did you know?<\/h4>\n<p class=\"font-meta-serif-pro font-normal scene:font-itc-avant-garde-gothic-pro scene:font-light text-lg md:text-xl md:leading-9 tracking-px text-body gg-dark:text-neutral-100\"><span style=\"font-weight:400\">Futures contracts originated with <\/span><a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.investopedia.com\/terms\/d\/dojima-rice-exchange.asp\" class=\"sc-adb616fe-0 ePvUAp\"><span style=\"font-weight:400\">17th-century Japanese samurai<\/span><\/a><span style=\"font-weight:400\">, who were paid in rice but were out most of the year doing whatever it is that 17th-century samurai do. But they wanted to ensure that the rice they were paid in, say, February held its value until August, so they traded contracts that obliged the signee to pay out the equivalent amount of rice in August, regardless of its current value.\u00a0<\/span><\/p>\n<\/div>\n<p class=\"font-meta-serif-pro scene:font-noto-sans scene:text-base scene:md:text-lg font-normal text-lg md:text-xl md:leading-9 tracking-px text-body gg-dark:text-neutral-100\"><span style=\"font-weight:400\">The reason why you might trade Bitcoin futures as opposed to just, say, buying lots of Bitcoin worth $4,000 at the time, is that you don\u2019t have to hold them yourself. (Our Japanese samurai analogy is helpful here\u2014the Japanese samurai traded futures contracts so they wouldn\u2019t have to store the rice themselves).\u00a0<\/span><\/p>\n<p class=\"font-meta-serif-pro scene:font-noto-sans scene:text-base scene:md:text-lg font-normal text-lg md:text-xl md:leading-9 tracking-px text-body gg-dark:text-neutral-100\"><span style=\"font-weight:400\">Some crypto exchanges, such as <\/span><a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.okex.com\/fees.html\" class=\"sc-adb616fe-0 ePvUAp\"><span style=\"font-weight:400\">OKEx<\/span><\/a><span style=\"font-weight:400\">, have lower trading fees for futures contracts, which means that traders can squeeze a bit more out of their accounts by using futures.\u00a0<\/span><\/p>\n<h2 class=\"sc-2ed2039d-2 hmmXcn gg-dark:text-white scene:font-itc-avant-garde-gothic-pro scene:font-light\" style=\"margin-top:2em;text-align:left;padding-bottom:16px;margin-bottom:16px;border-bottom:1px solid #dfe2e4\"><span style=\"font-weight:400\">How a trader exits their futures position<\/span><\/h2>\n<p class=\"font-meta-serif-pro scene:font-noto-sans scene:text-base scene:md:text-lg font-normal text-lg md:text-xl md:leading-9 tracking-px text-body gg-dark:text-neutral-100\"><span style=\"font-weight:400\">Nick Cowan, CEO of the <\/span><a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.gsxgroup.global\/\" class=\"sc-adb616fe-0 ePvUAp\"><span style=\"font-weight:400\">GSX Group<\/span><\/a><span style=\"font-weight:400\">, told <\/span><i><span style=\"font-weight:400\">Decrypt<\/span><\/i><span style=\"font-weight:400\">: \u201cBTC futures are a great way to bring in additional liquidity to the market and also provide great <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/decrypt.co\/resources\/what-is-crypto-arbitrage-and-how-does-it-work\" class=\"sc-adb616fe-0 ePvUAp\">crypto arbitrage<\/a> opportunities.\u201d That\u2019s because futures contracts are generally not held until their expiration date. Instead, they are traded like other assets. As the trading value of Bitcoin varies, so too will the value of different Bitcoin futures contracts.\u00a0<\/span><\/p>\n<p class=\"font-meta-serif-pro scene:font-noto-sans scene:text-base scene:md:text-lg font-normal text-lg md:text-xl md:leading-9 tracking-px text-body gg-dark:text-neutral-100\"><span style=\"font-weight:400\">When entering a futures contract, there are three ways a trader can exit their position: offsetting, rollovers and expiry. Offsetting is the most common, and occurs when a trader creates another futures contract with an equal value and size, making their effective obligations zero as they balance out. Rolling over is done by offsetting a position, but with an expiry date that is further into the future. Expiry is what you\u2019d expect: it\u2019s when a contract reaches its end date and the parties who hold the contract buy or sell at the agreed price.<\/span><\/p>\n<h2 class=\"sc-2ed2039d-2 hmmXcn gg-dark:text-white scene:font-itc-avant-garde-gothic-pro scene:font-light\" style=\"margin-top:2em;text-align:left;padding-bottom:16px;margin-bottom:16px;border-bottom:1px solid #dfe2e4\"><span style=\"font-weight:400\">Futures contracts and hedging<\/span><\/h2>\n<p class=\"font-meta-serif-pro scene:font-noto-sans scene:text-base scene:md:text-lg font-normal text-lg md:text-xl md:leading-9 tracking-px text-body gg-dark:text-neutral-100\"><span style=\"font-weight:400\">Another trading method for futures is hedging. Hedging is a way to reduce risk, which is useful for traders dealing with the volatility of cryptocurrencies.\u00a0<\/span><\/p>\n<p class=\"font-meta-serif-pro scene:font-noto-sans scene:text-base scene:md:text-lg font-normal text-lg md:text-xl md:leading-9 tracking-px text-body gg-dark:text-neutral-100\"><span style=\"font-weight:400\">Consider a trader who just bought three Bitcoin at a $10,000 a pop: <\/span><\/p>\n<ul>\n<li class=\"font-meta-serif-pro font-normal text-lg md:text-xl md:leading-9 tracking-px text-body gg-dark:text-neutral-100\"><span style=\"font-weight:400\">\ud83d\udcc8 She believes that the price of Bitcoin will rise by the end of the month, but wants to protect her position in case it goes down. <\/span><\/li>\n<li class=\"font-meta-serif-pro font-normal text-lg md:text-xl md:leading-9 tracking-px text-body gg-dark:text-neutral-100\"><span style=\"font-weight:400\">\ud83d\udcc5 To protect her position, she can enter a futures contract to sell one Bitcoin for $10,000 at the end of the month.\u00a0<\/span><\/li>\n<li class=\"font-meta-serif-pro font-normal text-lg md:text-xl md:leading-9 tracking-px text-body gg-dark:text-neutral-100\"><span style=\"font-weight:400\">\ud83d\udcb0 At the end of the month, if Bitcoin has gone up, she will make a profit by selling the remaining two Bitcoin. <\/span><\/li>\n<li class=\"font-meta-serif-pro font-normal text-lg md:text-xl md:leading-9 tracking-px text-body gg-dark:text-neutral-100\"><span style=\"font-weight:400\">\ud83d\udcc9 If it goes down, she will lose money, but this will be limited as she can still sell one Bitcoin for $10,000. <\/span><\/li>\n<\/ul>\n<p class=\"font-meta-serif-pro scene:font-noto-sans scene:text-base scene:md:text-lg font-normal text-lg md:text-xl md:leading-9 tracking-px text-body gg-dark:text-neutral-100\"><span style=\"font-weight:400\">Hedging reduces a trader\u2019s overall risk, although it does also limit their potential profits.\u00a0<\/span><\/p>\n<h2 class=\"sc-2ed2039d-2 hmmXcn gg-dark:text-white scene:font-itc-avant-garde-gothic-pro scene:font-light\" style=\"margin-top:2em;text-align:left;padding-bottom:16px;margin-bottom:16px;border-bottom:1px solid #dfe2e4\">The pros and cons of Bitcoin futures<\/h2>\n<p class=\"font-meta-serif-pro scene:font-noto-sans scene:text-base scene:md:text-lg font-normal text-lg md:text-xl md:leading-9 tracking-px text-body gg-dark:text-neutral-100\">First things first: Bitcoin futures are\u2014by their very definition\u2014speculative investments. In its decade-plus year history, Bitcoin has proven that the only constant is <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/decrypt.co\/resources\/why-is-bitcoins-price-so-volatile\" class=\"sc-adb616fe-0 ePvUAp\">price volatility<\/a>, and while the famed cryptocurrency might be on a <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/decrypt.co\/45875\/bitcoin-bull-run-different-paypal\" class=\"sc-adb616fe-0 ePvUAp\">bull run<\/a> now, there\u2019s no telling what tomorrow might bring for Bitcoin. If you speculate at the wrong time, you could be left stranded with a future asset that just isn\u2019t worth it.<\/p>\n<p class=\"font-meta-serif-pro scene:font-noto-sans scene:text-base scene:md:text-lg font-normal text-lg md:text-xl md:leading-9 tracking-px text-body gg-dark:text-neutral-100\">There\u2019s also something to be said for being an experienced investor. To successfully utilize futures, an investor needs to understand market behavior, have enough knowledge to pay attention to reasonable market predictions, and enough sense to discard unfounded claims. Ultimately, Bitcoin futures are speculative, but it is possible to leverage good information on a best effort basis. Doing that, however, is not exactly easy, so one might argue that Bitcoin futures are not very accessible for the average person.<\/p>\n<p class=\"font-meta-serif-pro scene:font-noto-sans scene:text-base scene:md:text-lg font-normal text-lg md:text-xl md:leading-9 tracking-px text-body gg-dark:text-neutral-100\">The inverse of this is that Bitcoin futures are a great way of getting ahead of a positive market price. If an investor times it right, there could, at least hypothetically, be major profit to be had by leveraging the Bitcoin Futures market.<\/p>\n<p class=\"font-meta-serif-pro scene:font-noto-sans scene:text-base scene:md:text-lg font-normal text-lg md:text-xl md:leading-9 tracking-px text-body gg-dark:text-neutral-100\">Bitcoin futures also\u2014counterintuitively\u2014don&#8217;t involve holding any Bitcoin whatsoever. Instead, it simply involves trading Bitcoin at a future, pre-agreed upon date, whatever the price at that time may be. Understanding the market might not be the most accessible task, but you don\u2019t even need an ounce of technology to get involved, not even a <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/decrypt.co\/45150\/the-best-bitcoin-wallets-hardware-software-and-mobile\" class=\"sc-adb616fe-0 ePvUAp\">Bitcoin wallet<\/a>.<\/p>\n<h2 class=\"sc-2ed2039d-2 hmmXcn gg-dark:text-white scene:font-itc-avant-garde-gothic-pro scene:font-light\" style=\"margin-top:2em;text-align:left;padding-bottom:16px;margin-bottom:16px;border-bottom:1px solid #dfe2e4\">Cash settlements<\/h2>\n<p class=\"font-meta-serif-pro scene:font-noto-sans scene:text-base scene:md:text-lg font-normal text-lg md:text-xl md:leading-9 tracking-px text-body gg-dark:text-neutral-100\">Bitcoin futures are settled with cash. Because no active Bitcoin trading takes place in a futures market, agreements are satisfied by trading at future, pre-agreed prices. Another oft-cited advantage of the Bitcoin futures market is that the possibility of settling in cash means that no complex software or technological expertise is really necessary in order to get involved in this arena.<\/p>\n<h2 class=\"sc-2ed2039d-2 hmmXcn gg-dark:text-white scene:font-itc-avant-garde-gothic-pro scene:font-light\" style=\"margin-top:2em;text-align:left;padding-bottom:16px;margin-bottom:16px;border-bottom:1px solid #dfe2e4\">Margin trading<\/h2>\n<p class=\"font-meta-serif-pro scene:font-noto-sans scene:text-base scene:md:text-lg font-normal text-lg md:text-xl md:leading-9 tracking-px text-body gg-dark:text-neutral-100\">One aspect of Bitcoin futures is margin trading, which essentially means that an investor only requires a percentage of a contract\u2019s total in order to participate.<\/p>\n<p class=\"font-meta-serif-pro scene:font-noto-sans scene:text-base scene:md:text-lg font-normal text-lg md:text-xl md:leading-9 tracking-px text-body gg-dark:text-neutral-100\">Leveraging 10-20% of a Bitcoin future means that an investment has both a high potential for profit, but also for a loss.<\/p>\n<h2 class=\"sc-2ed2039d-2 hmmXcn gg-dark:text-white scene:font-itc-avant-garde-gothic-pro scene:font-light\" style=\"margin-top:2em;text-align:left;padding-bottom:16px;margin-bottom:16px;border-bottom:1px solid #dfe2e4\"><span style=\"font-weight:400\">Bitcoin futures: a note of caution<\/span><\/h2>\n<p class=\"font-meta-serif-pro scene:font-noto-sans scene:text-base scene:md:text-lg font-normal text-lg md:text-xl md:leading-9 tracking-px text-body gg-dark:text-neutral-100\"><span style=\"font-weight:400\">The world of Bitcoin futures isn\u2019t all fun and games. Taking on a contract is a serious obligation, and if it reaches its expiry date, the trader has a legal obligation to fulfill it.<\/span><\/p>\n<p class=\"font-meta-serif-pro scene:font-noto-sans scene:text-base scene:md:text-lg font-normal text-lg md:text-xl md:leading-9 tracking-px text-body gg-dark:text-neutral-100\"><span style=\"font-weight:400\">Futures could lose you a lot of money, as you could be forced to buy Bitcoin way above its current trading price. Cryptocurrencies are one of the most volatile asset classes available; as with all cryptocurrencies, trading Bitcoin is very risky.\u00a0\u00a0<\/span><\/p>\n<div>\n<p class=\"font-bold uppercase text-sm text-body gg-dark:text-neutral-100\">Disclaimer<\/p>\n<p class=\"content font-akzidenz-grotesk font-bold uppercase opacity-60 text-sm\">The views and opinions expressed by the author are for informational purposes only and do not constitute financial, investment, or other advice.<\/p>\n<\/div>\n<div class=\"my-4 border-b border-decryptGridline\">\n<div class=\"text-left p-8 md:py-12 md:px-12 max-w-prose relative\"><span class=\"border-t-4 border-l-4 w-4 h-4 md:border-t-[6px] md:border-l-[6px] md:w-6 md:h-6 border-decryptPurple dark:border-decryptNeon gg-dark:border-cc-pink-2 absolute top-4 left-4 md:top-6 md:left-6\" \/><span class=\"border-t-4 border-l-4 w-4 h-4 md:border-t-[6px] md:border-l-[6px] md:w-6 md:h-6 border-decryptPurple dark:border-decryptNeon gg-dark:border-cc-pink-2 absolute rotate-180 bottom-4 right-4 md:bottom-6 md:right-6\" \/><\/p>\n<h3 class=\"font-akzidenz-grotesk font-bold text-xl md:text-3xl mb-6 md:text-center gg-dark:text-white\">Stay on top of crypto news, get daily updates in your inbox.<\/h3>\n<\/div>\n<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>In brief A futures contract is an agreement that obligates a trader to buy or sell an asset at a specific time, quantity and price. Bitcoin futures help to bring in additional liquidity to the market and also provide opportunities for arbitrage. As the trading value of Bitcoin varies, so too will the value of [&hellip;]<\/p>\n","protected":false},"author":2,"featured_media":164612,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5],"tags":[230,225,221,227,226,228,229,60,223,224,222],"class_list":["post-164611","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-cryptocurrency","tag-brave","tag-coinbase","tag-crypto","tag-decentralised","tag-decentralized","tag-decentralized-exchange","tag-erc-20","tag-featured","tag-meme-coin","tag-robinhood","tag-solana"],"_links":{"self":[{"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/posts\/164611","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/comments?post=164611"}],"version-history":[{"count":2,"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/posts\/164611\/revisions"}],"predecessor-version":[{"id":164618,"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/posts\/164611\/revisions\/164618"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/media\/164612"}],"wp:attachment":[{"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/media?parent=164611"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/categories?post=164611"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/tags?post=164611"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}