- Binance will soon open a futures trading platform
- Futures’ trading brings in institutional investors
- Crypto exchanges guarantee parties will fulfill their obligations
Binance cryptocurrency exchange will soon launch a futures trading platform. The initiative is expected to bring more liquidity to the crypto market as more sophisticated products get introduced.
Initially Support BTC/USDT Futures
The announcement was made by the crypto exchange’s CEO Changpeng Zhao (CZ) as he gave the keynote address during the Asia Blockchain Summit in Taipei, Taiwan on July 2, 2019. According to a tweet on Binance’s official Twitter handle, the futures trading platform, christened Binance Futures, will initially support BTC/USDT futures with up to 20x leverage. However, the platform will eventually be able to support more pairs with even higher leverage.
— Binance (@binance) July 2, 2019
The introduction of cryptocurrency futures on regulated trading venues has been regarded as a significant milestone in bringing cryptocurrencies closer to mainstream investing. While there are skeptics who believe digital currencies are too risky and speculative for long-term investment purposes, cryptocurrency enthusiasts believe that futures’ trading is what will open the floodgates for institutional money into the crypto industry.
Unlocking the Cryptocurrency Market
Bitcoin futures represent an agreement to buy or sell a given amount of BTC on a particular day at a price that has been pre-determined, and to this extent, they are similar to any derivative financial instrument of its kind.
Companies and businesses buy futures in order to fix the price for a specific time period, which gives them the luxury of price stability even when the market is volatile. Investors almost always use futures for hedging risks or speculations since the value of the futures contracts is based on the overall performance of the underlying crypto asset.
Two Chicago-based exchanges CBOE and CME launched Bitcoin futures trading in December 2017, therefore unlocking the cryptocurrency market for institutional investors. The exchanges guarantee that the parties involved in the futures contract will fulfill their respective obligations as per the applicable legislation. Market players that had been hitherto discouraged as a result of an unregulated stance of the crypto asset now have a handy tool to get exposure or hedge cryptocurrencies and benefit from price fluctuations.
Following other Crypto Exchanges
The decision by Binance to enter the futures market follows a similar move by Bitfinex exchange which is ready to create a derivatives product that comes with up to 1oox leverage. BitMex cryptocurrency exchange is also offering a similar product with up to 100x leverage on its Bitcoin perpetual swap contract. Binance endeavor of rolling out its margin trading offering will help it join several other crypto exchanges (Bitfinex, Poloniex, Huobi, Kraken) that support margin trading already.