![]() ![]() Hence, you can trade on Binance futures for a much lesser investment while enjoying the same level of benefits. Of course, leverage on Binance decreases as the trading amount increases, but you will still get attractive leverage. If you use 125x leverage to buy a BTC futures contract trading at USD 35,000, you’ll be able to buy five contracts for just USD 1,400. Not many people will have such an amount handy for crypto trading. Suppose BTC is currently priced at USD 35,000. No such leverage is available for buying crypto assets. As discussed, Binance offers up to 125x leverage on futures. Second, you don’t get leverage when buying cryptos directly. While Binance allows you to buy Bitcoin directly, not many exchanges support direct crypto buying. Now, let’s answer the question: Why not buy Bitcoin directly?įor starters, you need dedicated wallets to buy and store crypto. That is, in a nutshell, how Binance futures work. And you made this profit without holding any Bitcoin at all. If your prediction turns out to be true and Bitcoin surges by USD 1,000 and the futures entry price also increases by USD 1,000, you’ll earn a profit of USD 5,000. So, suppose you feel that Bitcoin’s price will increase by USD 1,000, so you buy five BTC futures contracts. Now, let’s return to buying Binance futures. But let’s assume that, for the most part, the futures price stays close to the spot price. The differences occur because the crypto market is subject to immense volatility and sudden price fluctuations. And sometimes, it may deviate significantly from the spot price. Sometimes, it may trade at almost the same price as the underlying asset. While futures are supposed to trade close to the spot’s price, it’s not always the case. Futures contract buyers and sellers need to pay a funding fee for that. Since a perpetual futures contract doesn’t have an expiry date, Binance (along with other exchanges) implements a funding rate mechanism to ensure that the futures entry price stays close to the spot price. Here, Rf is the annual risk-free rate, and x is the number of days to expiry. ![]() Crypto Futures Price = Crypto Spot Price x.In case you’re curious, here’s how crypto futures price is calculated: New to crypto trading? Learn if you can lose more than you invest in Crypto Futures? Binance Futures Pricing Explained Please note that the underlying asset (Bitcoin) and its futures contract (BTCUSD) are different products and trade at different prices. ![]() The next option is to buy its futures contract (BTCUSD). One option is to buy Bitcoin and wait for its value to surge directly. Suppose you believe that a crypto asset – suppose Bitcoin – will surge by USD 1,000 in value over the next month, but you don’t hold any Bitcoin. If not, then hang in there, as we’re going to discuss the working of Binance futures with a real-life example. If you already know about how futures work, you can skip to the next section. Derivatives allow you to leverage crypto price changes to earn profits without actually holding the assets. Futures (along with options) are known as derivatives, as they are derived from the underlying crypto asset. Try Binance Now How Do Binance Futures work?īinance futures work the same as equity and stock indices futures. It’s essential to effectively manage risk-reward when trading derivatives with leverage.īinance currently offers more than 90 contracts across USDT and coin-margined instruments. Therefore, leverage trading futures contracts can involve significant risks of losses. Therefore, high leverage is better for risk-averse traders.įurthermore, crypto derivatives are subject to high volatility and price fluctuations. But on the downside, it also exposes you to a potential loss of 125x. This multiplies your profitability by 125x. This means you can take a position 125x larger than your initial margin.įor example, if you have an initial margin of 1 BTC, you can hold futures worth 125 BTC. Binance offers up to 125x leverage on Binance futures. Leverage is an important element of Binance trading. New to Binance? Learn about Which is better Binance Margin or Futures? Leverage Trading Therefore, traders can hold these contracts for as long as they want to do. Perpetual contracts are a new type of futures contract that has no expiry date. These are quarterly contracts that come with a three-month expiry. In case you’re not familiar with perpetual and quarterly futures contracts, here is a quick explanation. USD-M Futures: These are perpetual or quarterly contracts settled in USDT or BUSD. ![]() Coin-M Futures: These are perpetual or quarterly contracts settled in Cryptocurrency Perpetual Delivery.Try Binance Now Types of Futures Exchange Contractsīinance offers two types of futures contracts: ![]()
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