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Author: Admin | 2025-04-28
What Are Bitcoin Futures? When Bitcoin first hit the market in 2009, no one was really sure where it would go, let alone whether the buzz would last. Because it was traded on a decentralized exchange, authorities thought this digital currency would lead to illegal transactions, money laundering, and even terrorist financing. But the market has come a long way since then. The value of and interest in this cryptocurrency has exploded exponentially. Trading takes place on exchanges or through sites that allow peer-to-peer transactions. Bitcoin isn't regulated by most governments, which means financial institutions can't facilitate transactions. Its popularity has led to the development of other forms of digital money and other ways to trade Bitcoin. Market participants can now trade Bitcoin futures contracts. These futures contracts were launched in December 2017 and have gained a lot of traction since then. They give investors exposure the same way they would to a commodity without the need to hold the underlying cryptocurrency. As such, Bitcoin futures contracts also offer risk mitigation and hedging possibilities. If you're interested in learning more about these contracts, keep reading. This article looks at how Bitcoin futures contracts are priced.Key TakeawaysBitcoin futures contracts were first introduced in December 2017.Trading on the Chicago Mercantile Exchange, investors can go through brokers to purchase and sell these futures contracts. You can use the theoretical formula to make a simple calculation of the futures price from the spot price of Bitcoin.Bitcoin is highly susceptible to volatility, which can have a drastic impact on prices. Investors should remember that wild swings in the spot price could significantly alter futures prices for Bitcoin. The Basics of Bitcoin Futures Before we look at how Bitcoin futures are priced, it's important to note some of the basics of these contracts. Bitcoin futures contracts trade on the Chicago Mercantile Exchange (CME), which offers monthly contracts for cash settlement. This means an investor can take cash rather than physical delivery of Bitcoin upon settlement of the contract. Interested investors can go through a broker, such as Forex.com, TD Ameritrade, and Interactive Brokers, to get in on the action. The CME introduces new Bitcoin contracts every month. These contracts are listed for six months. The exchange also lists two more December contract months. Trading begins when market makers set an initial price for these contracts. As momentum increases, the supply-demand mechanism takes precedence to determine the price of the futures. Determining the Price of Bitcoin Futures All futures contracts derive their value from their respective underlying security. Bitcoin futures prices depend on the currency's spot prices. This is the market's current price at which Bitcoin can be purchased or sold for immediate delivery. Any move in
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