As will be explained in further depth in a few moments, futures exchanges generally have leveraged trading (trading in which the asset is artificially inflated by what’s known as using margin, a sort of quid pro quo of all futures trades that are leveraged on margin: you will risk 10% of the amount you are leveraging your assets to artificially act as, as well as the original cost of the contracts.
Quick example: if I took $1000 and leveraged that value of BTC equivalent on margin on an exchange such as Bitmex, I could use the $1000 as a precedent for accessing $100000 buying power, merely with $10000, which is 10% against the figure the assets are leveraged to, where I am effectively having the profit capability that $100000 of BTC could take in, but only actually risking $11000 to do so ($1000 futures contracts, with $10000 held aside as margin fee for leveraging 100x ).
This particular trade modality in which the “bet” on the asset, where the “put”, or selling of an asset’s contracts at a price lower than its current level can be optioned, or essentially a wager that the asset will be worth more, a “call” can be opened as positions.
Under the Bitmex system, the $1000 dollars of contracts represent 1000, 1:1, contracts, contract to dollar USD value worth of BTC (based upon BTC/USD price at the time the trade was entered to the order-book, is how the amount of bitcoin you’re working with is calculated under the current rules of this system.
Essentially, the $1000 would represent 0.1 BTC with BTC valued at say $10000 at the time of entering in the order book). Currently, Bitmex is by far the largest and most popular exchange used for futures, as they are offers not only for BTC, but also other crypto assets: Ethereum, Litecoin, Tronix,, BTC cash, BTC perpetual up/down contracts (which alleges, although I cannot speak to it’s validity, or lack thereof, that it is a connected exchange to Bitmex offering these contracts at up to 500x leverage, with up to 3 months on the order book before liquidation, taking additional margin fees daily as a percentage).
The possibilities are endless, and at the moment, Binance is about to be the next exchange to launch major futures trading (Binance being a company based out of Malta and Hong Kong, thus not needing US regulatory authority to operate such reforms).
However, there have been 2 recent developments in regards to BTC futures exchanges in the USA BakktTM, an LLC for approximately two years which has been trying to get SEC (Security and Exchange Commission) approval, and the approval by the CBOE (Chicago Board of Exchanges).
This sort of major development would be the proverbially match lighting the fire, sending cryptocurrency markets into a major bull run, in which equity would pour in from all sides, boosting the entire market). The potential profits accessed through futures are tremendous, beyond belief almost. Presently TD Ameritrade is offering futures for clients with $25000 or more to invest, with this high minimal investment making it an inaccessible trading modality for most (for now).
The Ledger X Omni futures exchange is on the way toward approval, with investors essentially viewing this as a case of when, not if. Likely sometime in 2020, and not before, future exchanges will have approval and oversight, causing more attention for this gigantic market, with this sector almost growing entirely in the background of finance, out of public view, but remaining a highlight in conversation from the perspective of the visionary financiers of Wall Street and Silicon Valley. Ledger X Omni will have a minimum which allows for even relatively small investors to enjoy futures trading privileges; anyone with 1 BTC or $10000 value to open an account will have the ability to day-trade options.
Bitcoin futures being legitimized through regulatory practices will evolve and come after SEC approval and when systems are developed toward keeping in compliance within CBOE guidelines. Not only will equity come into the market through the “whales”, but Ledger X Omni gives your more average investor a chance at some massive profits, with minimization of risk.
Futures has been the “bread and butter” for many Wall Street investors. We are only at the beginning, but look how far we have already come, even in the face of strong opposition from central banks and government institutions, bitcoin and blockchain continue to prevail against all odds.
In the face of great dilemma, major investments will continue to come into the cryptocurrency and blockchain technology space no matter what. Omni is also exciting as it is the first futures contracts which will be done entirely with BTC, both as assets risked and leveraged on margin, and as a direct payout on contracts that are fulfilled.
This market will have a more clear order book than current Bitmex system, relying only upon its own value, not contracts fulfilled from a USD equivalency. Cryptocurrency continues to move in the right direction overall, as the argument for institutional investors only strengthens.