Futures trading is trading derivative contracts whose value is linked to the price of an underlying asset. In crypto markets, futures allow traders to take positions on price increases or decreases without necessarily owning the underlying coin.

A futures contract defines the settlement terms between the parties. Depending on its structure, it may involve delivery of the underlying asset or cash settlement. Crypto platforms commonly offer contracts settled in digital assets or stablecoins.

Key elements

  • contract size and specifications;
  • contract price;
  • margin collateral;
  • leverage;
  • position profit or loss;
  • liquidation conditions.

Many crypto platforms also offer perpetual futures, which do not have a fixed expiration date. These contracts use funding rates to help keep their price aligned with the spot market.

Futures can be used for speculation as well as hedging price exposure. Leverage increases both potential returns and potential losses.