Why Trade Bitcoin Futures vs the Spot Market?

Aug 17, 2023 | General

Bitcoin Futures (BTC) allow traders to speculate on the price of Bitcoin without having to buy or sell the underlying cryptocurrency itself, known as the “spot” currency. The easy-to-access futures marketplace allows traders to speculate the value of Bitcoin without actually owning the coin and can provide several distinct benefits.

Key Advantages of CME Bitcoin Futures

Launched in 2017 by the CME Group, Bitcoin Futures have changed the landscape and perception of cryptocurrency. Providing a marketplace to participate in Bitcoin price action without owning the underlying currency, BTC futures & options on futures can offer distinct advantages to traders.

  • Easy Access: Trading Bitcoin futures (BTC) affords the same ease-of-access as other derivative products from the CME. Existing futures traders can seamlessly start trading Bitcoin futures and new traders can open a futures trading account.
  • Trade Both Sides of the Market: Active traders who frequently day trade and swing trade can particularly benefit from BTC since it can be traded long or short without restriction. Bitcoin spot can only be traded on the long side meaning investors can only bet on a rise in the currency’s value.
  • Regulated marketplace: With regulatory oversight by the Commodity Futures Trading Commission (CFTC), Bitcoin derivatives traders have the reassurance of trading on a regulated exchange. *

Challenges of Spot Bitcoin

In contrast, traders looking to start trading actual Bitcoin, or “Bitcoin spot,” face some unique challenges.

  • More Homework Required: In order to start trading Bitcoin spot, investors must first set up a digital wallet with online platforms such as Bitfinex, BitStamp, Coinbase, or Kraken. This process can be difficult for the non tech-savvy or those unfamiliar with the crypto landscape.
  • Account Security Concerns: Web-based cryptocurrency exchanges are potentially more susceptible to technical errors and security concerns than well-established & regulated financial hubs such as the Chicago Mercantile Exchange.
  • Tax Challenges: Due to the nature of cryptocurrency and how it is treated for tax purposes, complications can arise when processing taxes on crypto gains & losses.

Bitcoin Investor Kit

A complete resource for strategy and insight to help inform your commodity futures trading.

Article written by Quantified Models

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