Futures

What are Crypto Futures?

Futures are derivative contracts that let you speculate on cryptocurrency prices without owning the underlying asset. You can go long (bet price rises) or short (bet price falls) with leverage.

Types of Crypto Futures

Perpetual Contracts (Perps)

• No expiration date
• Most popular in crypto
• Funding rates keep price aligned
• 24/7 trading

Standard Futures

• Set expiration date (weekly, quarterly)
• Settle at expiration
• Price may differ from spot
• Less common in crypto

How Perpetual Futures Work

Opening a Position

1. Deposit margin (collateral)
2. Choose leverage (1-100x+)
3. Select long or short
4. Position size = margin × leverage

Funding Rate Mechanism

Every 8 hours:

• If perp price is higher than spot: Longs pay shorts
• If perp price is lower than spot: Shorts pay longs
• Keeps futures price close to spot

Closing Position

• Close manually anytime
• Get liquidated if margin runs out
• P&L settled in collateral currency

Long vs Short

Long Position

• Profit when price goes up
• Loss when price goes down
• “Buying” futures

Short Position

• Profit when price goes down
• Loss when price goes up
• “Selling” futures
• Unique to derivatives (can’t short spot easily)

Futures Example

10x Long BTC at $70,000

• Deposit: $1,000 (margin)
• Position: $10,000 (10x leverage)
• BTC rises to $77,000 (10% up)
• Profit: $1,000 (100% return)
• BTC falls to $63,000 (10% down)
• Liquidated - Lost $1,000

Liquidation

What It Is

Forced closure when losses approach your margin

Liquidation Price

Depends on leverage:

• 10x: ~10% adverse move
• 20x: ~5% adverse move
• 100x: ~1% adverse move

Avoiding Liquidation

• Use lower leverage
• Set stop losses
• Monitor positions
• Add margin if needed

Futures vs Spot

Feature	Futures	Spot
Own crypto	No	Yes
Leverage	Yes (1-100x+)	Usually no
Short selling	Easy	Difficult
24/7	Yes	Yes
Funding costs	Funding rates	None
Liquidation risk	Yes	No

Funding Rates Explained

Positive Funding (Most Common)

• More longs than shorts
• Longs pay shorts
• Cost to hold long positions

Negative Funding

• More shorts than longs
• Shorts pay longs
• Cost to hold short positions

Rate Magnitude

• Usually -0.1% to +0.1% per 8 hours
• Can spike during volatility
• Impacts holding costs significantly

Major Futures Exchanges

Exchange	Features	Notes
Binance	Largest, up to 125x	Full featured
Bybit	Derivatives focus	Popular for perps
OKX	Comprehensive	Good liquidity
Deribit	Options leader	BTC/ETH only

Futures Trading Strategies

Hedging

• Long spot + short futures
• Protects against downside
• Professional use case

Funding Arbitrage

• Collect funding payments
• Delta-neutral positions
• Requires careful management

Directional Trading

• Leverage on market views
• Higher risk, higher reward
• Requires skill and discipline

Risk Management for Futures

Position Sizing

• Risk 1-2% of account per trade
• Account for leverage in sizing
• Smaller positions with higher leverage

Stop Losses

• Always use them
• Calculate based on liquidation price
• Don’t move them further away

Isolated vs Cross Margin

• Isolated: Only that position’s margin at risk
• Cross: Entire account can be liquidated
• Isolated is safer for beginners

Common Mistakes

Over-Leveraging

Most common mistake - using too much leverage

No Stop Loss

Hoping position recovers leads to liquidation

Overtrading

More trades = more fees and more chances to lose

Ignoring Funding

Holding positions through many funding periods

Is Futures Trading Right for You?

Consider Futures If:

• You understand the risks
• Have proven spot trading success
• Can afford to lose
• Have strict risk management

Avoid Futures If:

• New to trading
• Trading with needed money
• Prone to emotional decisions
• Don’t understand leverage

The Reality

Statistics show 70-90% of retail futures traders lose money. The leverage that makes big wins possible also enables devastating losses.