HOW DO BITCOIN FUTURES WORK?

Bitcoins was created by an anonymous programmer called as Satoshi Nakamoto whose identity and existence is not let verified. Bitcoin futures has ought to become the new trading instrument. People have perceived it as a hard concept to understand but this article will make it easier even for a teenager. 

Futures is a term used in place of ‘contract’ in the financial world. It is an agreement to buy or sell assets for a specific price at a specific price. It consists of signed contracts signed by both the parties despite the current market price. Mining is a very popular concept which ought to be known by any investor. The mining process is done by the computer which help to create new bitcoins. Anyone anywhere can set up their device to maintain an account to mine bitcoins. 

HOW DO FUTURES WORK?

In futures, the individual bets on what the price would be in the future. You calculate and then expect the price of the cryptocurrency to grow or fall so that you buy or sell it. The main key point in the contract is A DEFINATE TIE FRAME which is also known as the expiration date.
Bitcoin futures are related to the bitcoin value which allows the spectators to bet on them. Bit coin in itself is unregulated but the futures are traded on regulated basis.

The Bitcoin futures is based on the price of BTC and it works according to the same contracts as normal stock exchange contracts. BTC futures is a good hedging instrument and involves less risk. 

  • Long contracts: Trader BUYS the contract at CURRENT price and sells it at growth.
  • Short contracts: Trader SELLS the contract at CURRENT price and when the prices decline again, the individual will acquire it again. 

Apart from betting on the market, investors can always sell their contracts before the expiry date. However, trading exchanges like CME and CBOE set high barriers which are normally affordable to wealthy individuals or professional investors. At the present, CME offers its contracts with a minimum price fluctuation of 5$ per Bitcoin with a maintenance margin of 50% which is very high.

For example: If the price of one bitcoin is $2 today. You are expecting the price of bitcoin to rise to 7$ in a month. So you buy a one month contract for 100 bitcoins at the present price (2$) which will make the contract worth $700 after a month if your calculations are right. 

In short when the Bitcoin is higher than your contract price agreement, then you profit from surplus. If the prices of the bitcoin go lower than your contract then you will incur losses. The difference will have to be paid and maintained at the collateral level required by the exchange. 

SOME USEFUL TRADING FORMULAE

If you want your future to work, you can use this simple formulae to calculate the approximate risks. The bitcoin prices depend on spot prices.

Calculating the futures price from the spot price
Future Price = Spot Price * (1+rf-d)
rf = Risk free rate 

However, the user should take in respect the legality of Bitcoins IN THEIR TERRITORY. Only a small percentage of bitcoins are illegal. Most of the transactions and exchanges are legal. Countries where inflation is high, avoid legalizing bitcoins in a fear of loosing the little income they receive. Otherwise, large international transfers through bitcoins take place overseas LEAGALLY. 

Do altcoins have a future?

The value of cryptocurrency has increased over the years after people have started to see the potential it holds. Many cryptocurrencies have also emerged after the success of bitcoins and many new coins were introduced in the market as well. It is also true that the prices of hot coins have slipped over the years as well. It is true that altcoins can give a healthy and strong competition for bitcoins. Cryptocurrencies are digital assets which are designed to function as an exchange medium. It uses a strong Cryptography to protect the financial transactions or keep hold on creation of supplementary units and can also be used for transferring other certifications as well.

Built up on the blockchain technology, it still has reason why the market suffers from the prevalent skepticism around it. People are not yet into crypto currency that much d as they are still very unfamiliar with the new upcoming technology. However, it is true that this market is a very volatile one and there is no guarantee about the outcome. It leads people to believe that the cryptocurrency market is not a reliable one. It is expected that all coins are going to go up this year. Altcoins are designed to overcome the shortcomings of bitcoins. Weather is improving blockchain technology. We can even expect Litecoin and Ethereum to replace our modern ways of payment. The momentum of Bitcoin has fallen around 70% since its highest record and this dip is actually the new ray of hope for other alternative coins. 

The values of altcoins are expected to rise in the future. Altcoins such as Ethereum and Ripple are actually trying to go head to head with Bitcoin terms of the competition rate. Even after this, the coins are dependent on the initial boom of Bitcoin values. The coins are actually more reliable and less prone to fluctuate according to some market experts. The most successful part of the cryptocurrency is the blockchain technology is that it uses Industry works on a decentralized platform but there are many such as Coinbase which appears to be more centralized and decentralized.  Now if the government decides to launch his own alternative coins it is sure to give a tough competition to Bitcoin and even hamper the performance. This will make tax collection very easy with almost negligible risk of fraud or theft. 

As it is the internet contributes was free and fair lead to the value of the altcoin. It is the objective to underpin alternative coins to integrate with the internet and make more opportunities for smooth operations. People who have always traded with bitcoins are still hesitant to switch over to other alternative coins for this precise reason.

 The randomly fluctuating market is not only restricted to altcoins. Even the top coin which is Bitcoin has shown history of appropriations as well full stop in this market there is no prediction about how the market is going to perform. However the adaptation rate of blockchain technology is actually accelerating. This is surely a sign that the world is moving towards digital currencies. It may hold some positive things for the alternative coins. 

However at present the future of altcoins are not shining very bright as most altcoins other than Litecoin have taken a sharp fall in the last few years. It is also very predictable as Litecoin is the only alternative coin with a strong performance throughout the years other than Bitcoin. This is the reason why it has been on the top.

CRYPTO FRIENDLY COUNTRIES YOU WOULD LIKE TO VISIT

With the growing acceptance of the blockchain technology, the world has started to see its exceptional potential in the market. In fact, many countries have already started to adopt crypt currencies. This means that there are many countries that are emerging as crypto currency hotspots around the world. They are also opening up for crypto related business. 

It is true that the crypto industry is yet to get a breakthrough in the global market. They are still in the developing and maturing stage. But many countries are actually trying to integrate the disruptive technology into their pre-existing frameworks. They are even drafting new legislation to help it move in the right directions. This can even turn into a potential win-win situation rather than a failure. These countries are actually taking pro active stance on crypto currency and blockchain technology. These are some counties which are indeed taking active steps to ensure growth and success of the digital economy. 

Switzerland is the very first country on the list. The country is known for being one of the most progressing countries in the world. Therefore, it is not surprise that it is viewing the crypto currency and the blockchain technology as a positive stance. Even though you require exchanges to be licensed, the Swiss Federal Tax Administration (SFTA) considers crypto currencies to be assets rather than currency. It is one of the major hubs for blockchain developers. The crypto valley is actually situated in this country itself. This place has its low taxes, and also a lax view on crypto currencies. Zug is also the birthplace of Ethereum. Zug in fact is also one of the first towns to accept Bitcoin for several public services. 

Next we have Japan which is perhaps one of the most tech-savvy countries in the whole world. Other than its cultural and scenic beauty, Japan also offers one of the most crypto and blockchain technology friendly environments.  The country is always in the forefront of the adoption of any new technological wave. It has adopted crypto and expanded its regulation around the new form of currency. It was actually introduced to protected consumers from exchanges should they go bankrupt. To carry out transactions with crypto currency, extensive regulations were also put in place regarding AML/CFT and KYC. Further, Bitcoin and Ethereum were recognized as being possible forms of payment. This led to a widespread use of crypto currency for general transactions across a number of retail stores. Currently, it is trying to make its way for the mass adoption of crypto as a method of payment.

Singapore is yet another country which offers a crypto and blockchain friendly environment. Businesses were unable to expand due to certain banking issues. However, the financial regulator announced that it was open to blockchain businesses so that it can work with banks help. The country recently passed a new regulatory framework for crypto payment processing businesses. Even though, the country is not yet at par with either Japan or Switzerland, it can be predicted that soon, Singapore will join the other as a leading country for crypto.

Estonia is also quickly emerging as the next crypto hotspot hub on the global stage. It is guiding the growth of the industry as well. Estonia is the first countries to regulate both crypto currency exchanges and wallets.  It is in fact the home of world’s largest digital assets exchange – Binance. It was favorable laws and a greatest of opportunities for the startups. The government is also open about the idea of the crypto and blockchain technology while acknowledging it’s potential

If you are also looking for the best place to be as a crypto enthusiast, hope this will help.