Lester Freeman
Crypto futures are an agreement between two counterparties to buy and sell a specific amount of an underlying crypto at a specific future price on a specific date. Crypto futures allow you to gain exposure to a wide range of cryptocurrencies without ever having to own them. Crypto futures can be traded on platforms such as Kraken Futures, which offers a wide range of products on a robust, low-latency, high-performance trading platform.
| Characteristics | Values |
|---|---|
| Definition | An agreement between two counterparties to buy and sell a specific amount of an underlying crypto at a specific future price on a specific date and time |
| Purpose | To gain exposure to a wide range of cryptocurrencies without ever having to own them |
| Use case | Individuals and organizations that own cryptocurrencies can use futures to hedge exposure against market movements |
| Advantages | Gain exposure to a wide range of assets without owning them outright; With a variety of collateral options, you have superior flexibility when opening new positions or maintaining existing positions; No matter what crypto you trade, you can choose to convert any profits into a currency of your choice |
| Features | Kraken Futures offer leverage, allowing you to amplify your buying or selling power; New margin mode functionality allows you to trade using isolated margin to limit your downside per contract, or use cross margin to utilize all of your collateral across all positions; Trade a range of currency pairs |
What You'll Learn
- Crypto futures allow you to gain exposure to a wide range of cryptocurrencies without owning them
- Crypto futures allow individuals and organizations that own cryptocurrencies to hedge against market movements
- Kraken Futures offers a wide range of products on a robust, low-latency, high-performance trading platform
- Kraken Futures offer leverage, allowing you to amplify your buying or selling power
- Kraken Futures' multi-collateral wallet allows you to manage all your positions without needing to move funds around
Crypto futures allow you to gain exposure to a wide range of cryptocurrencies without owning them
Crypto futures are contracts between two investors who bet on a cryptocurrency's future price, allowing them to gain exposure to a wide range of cryptocurrencies without ever having to own them. Crypto futures are similar to standard futures contracts, as they allow you to bet on the price trajectory of an underlying asset.
A crypto futures contract has three main components: an expiration date, units per contract, and leverage. The expiration date is when the contract must be settled, with one party buying and the other selling at a pre-agreed price. The units per contract define how much each contract is worth of the underlying asset and vary from platform to platform. For example, one CME bitcoin futures contract equals 5 bitcoins, while one bitcoin futures contract on Deribit equals 10 US dollars worth of bitcoin. Leverage allows investors to borrow capital to increase their trading size and potential gains.
Crypto futures are traded on various platforms, including traditional and crypto-native exchanges. Leading examples include the Chicago Mercantile Exchange (CME), the Chicago Board Options Exchange (CBOE), and Kraken.
Crypto futures offer several benefits, such as regulated exposure to cryptocurrencies, simplicity, and reduced risk compared to owning crypto directly. However, it's important to note that cryptocurrency is known for its volatile price swings, making investing in crypto futures risky.
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Crypto futures allow individuals and organizations that own cryptocurrencies to hedge against market movements
Crypto futures are agreements between two parties to buy and sell a specific amount of an underlying cryptocurrency at a specific future price on a specific date. Crypto futures allow individuals and organizations that own cryptocurrencies to hedge against market movements.
Hedging is a risk management strategy employed to offset potential losses that may be incurred by an individual or an organization. The concept is similar to taking out an insurance policy. For example, if you own a home in a flood-prone area, you would want to protect that asset from the risk of flooding by taking out flood insurance. In financial and crypto markets, hedging works in a similar way. It involves making an investment designed to reduce the risk of adverse price movements in an asset.
Crypto futures allow investors to buy or sell a cryptocurrency at a predetermined price at a specific future date. This can be used to hedge against potential price changes. For example, if you own Bitcoin and fear its price might drop, you can sell a Bitcoin futures contract. If the price of Bitcoin does drop, the profit from the futures contract would offset the loss in your Bitcoin holdings.
Crypto futures also offer regulated exposure to cryptocurrencies. This is a significant point in a volatile ecosystem with wild price swings. Bitcoin futures contracts at the Chicago Mercantile Exchange (CME) are regulated by the Commodity Futures Trading Commission (CFTC). This offers a measure of confidence and recourse to institutional investors, who compose the majority of traders in such contracts.
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Kraken Futures offers a wide range of products on a robust, low-latency, high-performance trading platform
Kraken Futures offers a seamless, flexible, and intuitive trading experience for crypto and Bitcoin derivatives trading. The platform is robust, low-latency, and high-performance, with a performant API for programmatic trading.
Kraken's multi-collateral futures wallet allows users to manage all their positions without moving funds around. For example, you can open a position on BTC/USD, use USDT as collateral, and convert any profits to Bitcoin. Kraken also offers leverage to amplify buying or selling power and flexibility in risk management.
The platform supports a range of currency pairs and is optimized for mobile devices, allowing users to create and manage positions on the go.
Kraken is one of the oldest and most trusted names in cryptocurrency, always striving to stay true to the core values of cryptocurrency and the security and privacy of its clients.
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Kraken Futures offer leverage, allowing you to amplify your buying or selling power
Crypto futures are a derivatives tool that traders can find on crypto exchanges. A crypto futures contract is an agreement between a buyer and a seller that represents opposite views on the future value of a cryptocurrency. The buyer profits if the contract's underlying asset increases in price, while the seller profits if it declines.
Kraken Futures is a platform that offers crypto futures contracts. One of the benefits of Kraken Futures is that it offers leverage, allowing you to amplify your buying or selling power. Leverage is when you use borrowed funds to increase the potential returns of a trade. With Kraken Futures, you can access leverage of up to 5x, meaning you can trade with up to five times the amount of funds in your account. For example, if you have $5,000 in your account, you could buy or sell $10,000 worth of BTC/USD.
Leverage can be a powerful tool for amplifying your gains from market swings. However, it is important to remember that it can also amplify your losses. When using leverage, you are taking on additional risk, so it is important to have a solid understanding of how it works and the potential risks involved.
Kraken Futures offers a flexible and customizable platform for trading crypto futures. In addition to leverage, Kraken Futures provides a multi-collateral wallet, allowing you to use a variety of collateral types to manage your positions. You can also trade a range of currency pairs and gain exposure to a wide range of cryptocurrencies without owning them outright.
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Kraken Futures' multi-collateral wallet allows you to manage all your positions without needing to move funds around
Kraken is a platform that allows users to trade in crypto futures. It offers two types of collateral wallets: Single-Collateral and Multi-Collateral. The Multi-Collateral wallet is a flexible option that allows traders to deposit a variety of collateral currencies to back their positions. This means that neither the base nor the quote currency is needed as collateral to trade, and all collaterals are valued in USD for margining under a single wallet with cross or isolated margin.
The Single-Collateral wallet, on the other hand, operates with separate wallets isolated per collateral asset. For example, if you are trading a BTC/USD contract, the only collateral allowed would be BTC.
The Multi-Collateral wallet has several advantages. Firstly, it allows you to manage all your positions without needing to move funds around. This is because the Multi-Collateral wallet supports multiple assets to be used as collateral, which are margined in real time in USD terms. This dynamic collateral system means you can adjust your positions without having to transfer funds in and out of your wallet.
Secondly, the Multi-Collateral wallet offers cross-margin positions by default. This means that the leverage level is determined by the size of your position(s) versus the collateral balance of the trading wallet. The larger your position relative to your collateral balance, the higher the leverage.
However, it is important to note that any funds held in your trading wallet are at risk. If you move funds out of your trading wallet after opening a position, your effective leverage will increase, which may lead to liquidation. Therefore, it is crucial to carefully manage your positions and collateral balances to avoid liquidation.
In conclusion, the Kraken Futures Multi-Collateral wallet is a powerful tool that allows traders to manage their positions and collateral dynamically. By supporting multiple collateral currencies and offering cross-margin positions, it provides traders with flexibility and the ability to adjust their leverage according to their position size. However, it is essential to carefully monitor your positions and collateral balances to avoid potential liquidation risks.
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Frequently asked questions
Crypto futures are agreements between two parties to buy and sell a specific amount of an underlying cryptocurrency at a specific future price, date, and time.
Crypto futures allow you to gain exposure to a wide range of cryptocurrencies without owning them directly. They also enable individuals and organizations that own cryptocurrencies to hedge their exposure against market movements.
You can trade crypto futures on a crypto exchange or brokerage that offers futures trading, such as Kraken Futures. These platforms often provide a flexible and user-friendly experience, along with robust trading tools and APIs for programmatic trading.
Crypto futures offer several benefits, including the ability to gain exposure to a diverse range of cryptocurrencies without owning them outright. They also provide flexibility in risk management through features like isolated and cross-margin modes. Additionally, crypto futures can be leveraged to amplify buying or selling power.
As with any investment, there are risks associated with trading crypto futures. The cryptocurrency market is highly volatile, and the value of your investment can fluctuate significantly. It is important to understand the underlying assets, fees, and potential regulatory considerations before investing in crypto futures.
