What are Bitcoin Futures — CME’s Micro Bitcoin Futures Contracts are Now Available to Trade at Interactive Brokers — Digitally Cool

The Launch of Micro Bitcoin Futures has opened an all-new segment in the crypto world. Learn more about bitcoin futures, micro bitcoins, and micro bitcoin futures and how to trade them.

Bitcoin futures are being considered as financial contracts. They obligate the buyer to purchase an asset (in this case, bitcoin) at a set price on a future date. Upon purchasing the asset at the end of the contract, the buyer receives the difference. It will be between the current market value and the contracted value as cash. It is important to note that bitcoin futures do not obligate the seller to sell bitcoin. If the buyer wishes or decides not to buy it at a future date, thus mitigating counterparty risk.

Why Trade Bitcoin Futures?

Trading bitcoin futures allows traders to speculate on the future value of bitcoin — in other words. They buy and sell contracts that give them the right to buy or sell real bitcoin at a specific rate at an agreed-upon date. Traders can use this strategy to take advantage of bitcoin price volatility without holding bitcoins themselves. This reduces their risk and can also be used to hedge — for example. A bitcoin futures trader will short sell bitcoins if he thinks their price is going to go down.

What are Micro Bitcoins?

Micro-bitcoin is a term that was used to refer to fractions of bitcoin. This, however, has changed over time with the introduction of new bitcoin denominations such as bits. The term is still used in reference to very small amounts of bitcoins, i.e., 0.00001 BTC.

How Can these be Used?

Well, aside from the obvious use of Micro Bitcoins, in the same way, you would use normal bitcoins (buying, selling, and trading). They also serve another important use case, microtransactions. Due to the high cost of using bitcoins for small payments, Micro Bitcoins have become the payment method of choice for small transactions. It is due to their unsurpassed efficiency. What’s more — they are open source and free to use, which means anyone can start using them (you don’t even need an account).

What Are Micro Bitcoin Futures?

Micro-bitcoin futures are a variant of the traditional bitcoin futures. They typically have low notional value and a short period, making them ideal for retail traders. This is for those seeking small profit but not going through strenuous procedures such as registration, margin calls, etc. To qualify as a micro futures product issuer needs to fulfill certain conditions:

• The product should be cash-settled.
• The minimum contract size must be 1 micro bitcoin (1 Satoshi).
• Futures contract life span should not exceed 3 days.
• Issuer of the future needs to be an FCA registered company.

CME’s Micro Bitcoin Futures Contracts Are Now Available To Trade At Interactive Brokers

The CME Group’s bitcoin futures are now available for trading on the Interactive Brokers Group platform. The launch follows and celebrates the successful completion of a liquidity and stress test. The CME Group is one of the largest exchange groups in the world. It is because its futures market hosts more than $1 quadrillion worth of contracts each year. Investors weren’t too interested when they first went live on December 18. They saw a volume but steady increase in the days since. According to a press release, interactive Brokers have become the first principal online broker to access CME’s bitcoin futures markets directly. Market commentators have suggested that this is because traders wait for prices to rise before entering into contracts.

How To Trade CMEs Micro Bitcoin Future Contracts At Interactive Brokers (IBKR)

Interactive Brokers Group, Inc. is an American financial services company focusing on the electronic execution and trading of financial derivatives. The firm is one of the largest U.S.-based retail marketplaces for trading futures contracts, options, stock indices, forex, ETFs, and precious metals. Interactive Brokers also offers many different tools for professional traders, such as APIs for developers, FIX and REST protocols, and trading software.

• To start trading with IBKR, set up a new account at IBKR.
• To create a new account, users need to submit their personal information, bank account details, income statement, tax statements along with their trading experience, etc.
• The contract size is 0.10 bitcoin, the outrights and spreads are $0.50 per contract and $0.10 per contract, respectively.
• You can check the commission rates of IBKR here.

Final Words

A brand-new market is born with CME’s launch of Micro Bitcoin Futures. The advantage to the exchanges is that they have locked up all this business ahead of time. While the futures might appeal to some investors who want to take on more risk for potentially higher returns, ETFs and other exchange-traded products might be a better choice for those who want to bet on the asset without having to hold it.

Originally published at https://digitallycool.com on November 19, 2021.