Trading Bitcoin vs. BTC Futures: A Comprehensive Guide

By Joseph Katala
15 Min Read

Bitcoin has opened the doors for the current cryptocurrency market today. Thus, as does the list of its various investment opportunities, Bitcoin’s popularity increases with time. Some possible issues in selecting one of them are the pros and cons of swapping Bitcoin against the future and vice-versa.

Bitcoin futures are a financial contract involving the agreement to exchange the actual cryptocurrency, Bitcoin, or its cash equivalent at a predetermined price on a future date. Investors enter Bitcoin futures to speculate on Bitcoin’s future price movements, essentially betting on whether it will rise or fall. These contracts are categorized as commodity futures and are regulated by the Commodity Futures Trading Commission (CTFC).

What are Bitcoin Futures

In such a deal, both parties are willing to purchase (or sell) physical BTC/USD at an agreed price and the mentioned (specified) period.

Find out more about Bitcoin and why it continues to dominate the cryptocurrency Market?

To illustrate, some investors like the Bitcoin futures market, which buys and sells options regarding the future value of the Bitcoin. It’s essentially a bet between two parties: Each assumes that the value of Bitcoin will appreciate, and the other believes it will decrease. Also, if the market price lies on the favorable edge of the first one, it implies cash payment.

Bitcoins have a similar nature for some items, such as currencies, stock indexes, and commodities, which functions as other kinds of futures contract. According to CFTC, bitcoin as currency falls in the commodity category but is also a payment of bitcoin futures.

At CME, you buy the bitcoin futures contracts contract. Cash settling is sometimes used in new monthly contracts in some markets. This is done every year in six months, expressed as three months in each quarter plus a contract in December.

Bitcoin futures consist of 5 bits with a monthly settlement at every month’s end.

What is a Futures Contract?

This is a futures contract involving two parties agreeing to sell the commodity at a particular price on the date. Derivative instruments and their value are relative to some other asset’s value.

Initially, Their primary nature was gold, oil, and foodstuffs commodities. These contacts protected the producers against the economic risk in that they were charging a pre-agreed amount to each party.

For instance, one example would be an aircraft company’s buying futures on oil prices to hedge its interest against major stakeholders when oil prices fluctuate.

For a long, it has been assumed that the cost of the primary asset will fall while, in short, we expect reduced prices.

Therefore, those in futures markets do not deal with money or coin-away exchanges. Furthermore, it facilitates the buyers to buy more sites even during a bank holiday or lack of money.

Futures contracts help crypto miners with unstable income streams in terms of certainty. Secondly, they assist professional and retail traders to close positive positions on their trading systems.

Read ” Crypto Futures Traders: What Are the 8 Common Trading Mistakes to Avoid?” and learn out more on common future mistakes.

The Basics of Futures Contracts

Let us begin with a simple explanation of a futures contract. You can sell (or take a market short sale) against delivery or go along with an offsetting purchase for hedging futures market purposes. Therefore, such parties depend on deposited margins for trading purposes.

As long as the market goes up, the margin moves from the buyers’ to the sellers’ side. This happens due to the “fairest price” of the contract, which is exchanged automatically and periodically.

For example, a user invests $100 and then sends it into Binance futures. An investor can acquire BTC Futures worth $1000 and ten times leverage. However, it must be clarified that contrary to the actual Bitcoins, these futures should not be exchanged for funds and moved to the normal Binance exchange.

Therefore, if, in this case, an investor wishes to have an order for 0.114 BTC pegged at one thousand USD, this initial margin in such a position shall be forty-nine point eighty-seven USD. The collateral requirement increases when the market starts losing value on the fair price of Bitcoins.

Buyers and sellers are anticipated to give margins, although they vary depending on market status. There’s something to keep in mind, however: This generates unseen costs for perpetual contracts. Many crypto futures contracts lack dates; hence, no one knows how long investors must hold their investment positions.

Reasons for Price Fluctuation Between Spot and Futures Markets

The difference in the delivery period and market environment explains why the price for the futures contracts varies from that of the spot market. Here’s a breakdown of the key reasons:

Settlement Timing

The settlement of such transactions is instant during trading on the spot market to your sale. However, when an individual opts to sell futures contracts, they do not receive immediate cash payments but delay payment until later. Such an order delay, however, might create a difference between what sellers desire to receive at prices in fluctuating market conditions (e.g., deflation).

Margin Calculation

Unlike conventional markets, where participants can distort prices through collusion, derivative exchanges determine margins independent of contract pricing, thus avoiding market abuse and manipulation. These spot indices are usually called FAIR PRICE and are obtained as a weighted arithmetic mean of the existing market values.

Manipulation Prevention

Fair-price indexes help to evade the temptations of those individuals and entities to pump up the futures contract price. It compares actual fair value based on current market prices with the reference price derived from a fair value. Sometimes, however, positions are at unacceptable margins and may end up getting closed due to market integrity purposes.

Supply and Demand Dynamics

Supply and demand dynamics may also affect the pricing differences at spot and future markets. Since the immediate transfer of spot ownership reflects market events better, it is often considered more representative since it directly indicates the market events transpiring at the moment.

Nonetheless, in commodity markets where payment comes later, the price is based on anticipated changes in demand and supply conditions. The spot and futures markets normally see price variations because the futures market traders usually tend to speculate about future price changes.

Interest Rates and Financing Costs

This phenomenon’s other major contributor is interest rates and financing charges. For instance, in the futures market, traders may have to obtain loans for margin payments.

The cost of borrowing and prevailing interest rates affect the futures’ price. For example, financing a futures position might be quite expensive since it may increase the gap between prices of spot and future markets.

Just in case you are building your way on Crypto Futures complete guide Crypto Futures vs. Traditional Futures is a must-read

Futures vs. Margin Trading, Spot Markets

However, this is the main difference between spot and margin trading in futures trading. It should be noted that in futures trade, all the trades have two equally sized parties whose maturities are also equitable. 

This maintains equilibrium in the market as it prevents the emergence of significantly large short and long positions. This differs sharply from margin trading, where traders must take loans and magnify their positions.

Settlement in Spot Trading takes place simultaneously with the trading itself. Put on buying a cryptocurrency. The sellers get fiat money, other assets, and stablecoins directly. On the other hand, the futures market requires both parties to the transaction to put up a margin, and there is no initial transfer of assets.

Moreover, one needs to comprehend that another marketplace for futures transactions differs from the main trading order book. Therefore, the cost of futures may vary from what it costs in the cash spot market. For instance, your trading may be using Binance Futures, and prices for the futures will still differ from prices available in the platform’s spot market.

Another type of transaction is futures trade; these contracts are standardized and have predetermined delivery dates, meaning they are paid on that date. These subtle differences show the trader the various quirks of every trading method.

Futures Trading Versus Spot Trading

In certain regards, spot trading is better than futures. Here are the key benefits:


A trader has higher control over a larger position than when dealing with the actual commodity in a future trade that takes place at a lower cost. Such a trader earns much more profit than an unleveled trader. If the market supports the trader, it increases his profits by that multiple. Despite this fact, however, additional debt magnifies any such large losses.


One outstanding example is a futures contract that shields businesses from the ups and downs in the prices of the underlying assets. For example, if they expect a hike in fuel prices, an airline would purchase futures on crude oil.

24/7 Trading

Unlike the spot partners with fixed work schedules, the futures markets are a nonstop business.


The people who deal with speculations should trade on futures markets because they need to benefit from the changeable market conditions. Doing so allows traders to pick between going long or short based on different views concerning a particular trading situation and market direction.


For instance, commodities, foreign currency, bond futures, and options on stocks are only some of these goods. Diversification of this kind allows traders to create different portfolios that diminish risks resulting from their vulnerability toward several assets.


As far as tradeability is concerned, they are highly liquid and transparent. As for market prices, their disclosure and the high volume of such transactions reduce the chances of market manipulation.

Tax Benefits

Futures trading is sometimes less taxed than spot trading in some regions. It is vital, however, to seek guidance from a competent tax advisor regarding this particular issue in your jurisdiction.

Nevertheless, one must note that more risks, such as large losses attributable to margin and price fluctuation, accompany futures trading. Futures is an instrument in which traders must have an articulated strategy, a risk management approach, and a thorough comprehension of the underlying market.

Which Is Best for You?

What you choose to trade between Bitcoin Direct or Bitcoin Future depends on your trading goal, risk appetite, experience, and preference in trading methodology. Here are some considerations:

Spot Trading: Spot trading is preferable when one wants to possess and spend it for trading purposes. This is simple and is a direct way of owning the bitcoins.

Futures Trading: For leveraged traders, speculators, as well as hedgers. Leverage involves high risk due to the volatility of prices, whereas flexibility is available.

Finally, the best decision will be subjective based on personal goals and knowledge about digital currency trading. Spot trading might be easier for novice traders, while futures offer a specific approach for experienced ones. Although your preferred decision should be well thought out and risk managed, one needs to be cautious about how bitcoin trading is in this world.

Read ” Crypto Futures Trading” and find out more on this comprehensive guide. 


For one, both decisions can be made to trade bitcoins on the spot market or engage in futures trading of the crypto coin. The latter depends on an investor’s goals, tastes, risk preferences, and expectations concerning returns.

In this kind of trading, someone buys or sells real Bitcoins that benefit Bitcoin owners and investors.

Despite this, Bitcoin futures help one control a big position with little capital. They also run twenty-four hours daily and present a chance to place hedges or wagers in price fluctuations. It involves greater amounts of margins as well as pricing and leverage.]

The use of this option depends on the investment objective, experience, and inclination of an individual trader. Therefore, spot trading is more suitable for buying and using your preferred Bitcoin in any spot. This is because experienced traders and traders following a strict strategy may identify futures contracts as avenues for generating profit, managing risk, and diversifying their portfolios.

J.Katala is a writer with a strong background in both cryptocurrency and blockchain technology, Katala has a unique understanding of these rapidly evolving crypto industries. Writing for both technical and non-technical audiences, he contributes informative and engaging content for websites, whitepapers, and thought leadership pieces. His current passions is observing industry news and developments and consistently producing timely, relevant content.