Want to trade cryptocurrencies but wish they were regulated? Read on to find out how the new Micro Bitcoin futures contract from the CME Group addresses this issue.
What are Micro Bitcoin futures?
You might have seen that back in May 2021 the Chicago Mercantile Exchange launched a micro futures contract for bitcoins.
Bitcoin futures allows traders and investors to participate in the bitcoin market through a transparent and regulated exchange, avoiding the pitfalls associated with ‘over-the- counter’ non-regulated entities.
The Micro Bitcoin futures contract is a tenth of a bitcoin and therefore one fiftieth of the standard 5-bitcoin futures contract from the CME Group. This smaller-size bitcoin contract opens up the possibility of cryptocurrency futures to retail traders with any account size.
Want some crypto action without the heartburn?
With the spot cryptocurrency market you have to set up a wallet or utilise an unregulated exchange, both of which could be set up by anyone who fancies their chances. No one regulates these markets.
With cryptocurrency derivatives you can trade as you would any other asset class with the piece of mind that your trades and investment capital are overseen by the safeguards inherent with the internationally recognized CME Group exchange, which is regulated by the Commodity Futures Trading Commission (CFTC).
Image courtesy of CME Group
Micro Bitcoin futures help with trading bitcoin for beginners
And as Gavin Holmes, Tradeguider’s CEO, points out in the video below, ‘It’s a good way to learn because you don`t have to have a sizable account [and the spot bitcoin market] moves very rapidly for most retail traders.
You can see Gavin live trading Micro Bitcoin futures in this video
In addition, it means the trader can scale in or out of their position, selling a portion to secure their profit and then keeping some exposure to catch any additional gains that are there to be had.
Traders already active in the cash cryptocurrency market might find this a great way to offset their exposure to that volatility - the bitcoin market being more volatile than commodities, FOREX and bonds at the moment.
And unlike with most cash cryptocurrency markets you can also short the market as easily as go long.
Already trading futures or FOREX? You find some familiar features here
The Micro Bitcoin Futures contract has the same features as the standard-sized CME Bitcoin futures contract – the same trading hours, listing cycles, final settlement procedures.
And similarly, when you come to sell you’ll receive a cash payout, settled according to the Bitcoin Reference Rate (BRR), Crypto Facilities and CME Group’s daily reference rate of the US dollar price of one bitcoin at 4pm London time. (A more detailed explanation can be found here.)
Meanwhile FOREX traders will be used to having differently sized contracts and this product gives them access to that smaller-sized contract.
In summary: Some cautions when trading bitcoin futures
- You’ve got to be nimble – the market moves very quickly.
- Have your stops in place (for the same reason).
- You do need to plan for how you’re going to exit your investment: most volume happens at the beginning of the contract period so don’t get caught needing to sell in an illiquid market close to the last Friday of the month that the contract expires.
- As of the time of writing (July 2021) this is a new product with lighter volume and a wider bid-ask spread.In the futures markets generally the bid/ask spread gets tight as the market matures. At present this will be more of interest to swing traders than scalpers for example. But that will change as the product matures
Micro Bitcoin Futures - CME Group
100,000 Micro Bitcoin Futures Trade on CME Exchange in First Six Days - Bitcoin.com
What CME Micro Futures Mean for the Bitcoin Market - Decrypt
Why Micro Bitcoin Futures are a Game Changer - Newsbreak.com
An Introduction to CME Group Micro Bitcoin Futures - futures.io
Wyckoff VSA Live Trading for Micro Bitcoin and Currencies - Tradeguider
Tradeguider is the home of Wyckoff VSA. Wyckoff VSA is one of the few methodologies that works in all currency markets including cryptos. Fundamental analysis and technical analysis don’t work for cryptos – the only thing to do is track supply and demand which is what VSA is all about. If you want to find out more, contact us and we’ll walk you through how you can use it for micro bitcoin futures, cryptos or futures.