What You Need to Know About Trading Bitcoin Futures

We’ve all heard by now about the miraculous growth of Bitcoin and other crypto-currencies. They became the breakout story of both technology and financial news media in 2017, after years of languishing in the sidelines. But now Bitcoin itself has spiked so high in price that it’s become viable to speculate in Bitcoin futures.

Futures investing is a way to streamline the profits from price fluctuations. Normally for a given commodity, you sign a contract which guarantees that you will buy X quantity of said commodity as $Y price, regardless of what that price does. If the price goes up, you made a profit. If the price goes down, the other participant made a profit. However, the game is a little different when speculating on Bitcoin. Here, the futures contract is a way to make Bitcoin investing more liquid. You can get in and cash out a future faster than a Coinbase transaction will take to approve.

Be advised that the best place to be regarding Bitcoin right now is “cautiously optimistic.” As with any investment, the first rule is to never invest more than you can afford to lose. That’s actually an easy proposition with Bitcoin right now; if you bought $100 of it last month, you could have sold that quantity for $259 this month (for an example). Profit is still profit; the trick is not to risk too much and get taken down by greed.

It’s tempting to compare crypto-currency’s value to something like gold or platinum; however, even that’s not a fair comparison. First, gold is regulated while Bitcoin is a wild, wild west. Second, gold’s price has never crashed because it has intrinsic value, while Bitcoin’s value is basically based right now on the notion that somebody in the future will be willing to buy it for a higher price. Trading in futures based on Bitcoin just adds another layer of risk, since it comes down to a bet you make on what the price of Bitcoin will be on a set date. You might as well pick any random number and be just as right as anyone else.

Only a few brokerage firms are considering offering Bitcoin futures. JPMorgan and Citigroup have so far opted out of the Bitcoin futures market. So if you’re an end consumer, it’s best to shop around and find the broker and bank who will work with you. Even though the market cap for crypto-currency is skyrocketing right now, the market isn’t considered mature enough for big banking and Wall Street to jump in with complete confidence.