In the United States, crypto Futures can only be traded on platforms that are registered with the CFTC (Commodity Futures Trading Commission), which considerably narrows down the list of exchanges.
Even though the demand for Futures contracts in crypto has been increasing, the CFTC would like to make sure that the exchanges providing these services are trustworthy.
This article will provide an overview of the options available for trading crypto Futures in the United States, including the most popular platforms and the products they offer.
It will also discuss how to choose the best exchange for your needs.
The Current State of Crypto Futures Trading in the US
As of 2021, crypto Futures trading in the United States is a rapidly growing market, with more and more platforms offering the ability to trade Futures contracts on various cryptocurrencies.
The two leading exchanges that offer crypto Futures trading in the US are the Chicago Mercantile Exchange (CME) and the Intercontinental Exchange (ICE).
CME offers Bitcoin Futures trading, while ICE’s Bakkt platform offers physically settled Bitcoin Futures trading. The CME also offers Options trading on Bitcoin Futures, which is a more advanced form of trading.
In addition to the traditional exchanges, there are also several crypto-native exchanges that offer crypto Futures trading, such as ErisX and LedgerX.
Overall, the market for crypto Futures trading in the US is becoming increasingly competitive, with more products and platforms being offered to meet the demands of a growing number of traders and investors.
All of these new exchanges are vying for approval by the CFTC to get a piece of the US trading market.
However, it is important to note that the market is still relatively new and can be highly volatile, so it is important to be well-informed and to understand the risks involved before trading crypto Futures.
How & Where To Trade Crypto Futures In the USA?
In the United States, crypto Futures can be traded on several platforms that are registered with the Commodity Futures Trading Commission (CFTC). Some of the most popular platforms include:
- Chicago Mercantile Exchange (CME)
CME offers Bitcoin Futures trading and Options trading on Bitcoin Futures.
This gives a chance to institutional as well as cautious retail investors to put their money into Bitcoin and profit from the price movement without actually owning any of the assets.
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With varying expiries and cash-settled contracts, these Futures cater to a variety of traders who wish to invest in the short-term or medium-term movement of Bitcoin.
- Intercontinental Exchange (ICE)
ICE’s Bakkt platform offers physically settled Bitcoin Futures trading. This is a good contract to trade if your intended outcome is to ‘stack sats’ or increase the amount of Bitcoin you own.
Once you close your position or if the position expires, the settlement will cause Bitcoin to either be debited or credited from or to your trading account.
ErisX, a CBOE Global Markets Company, is a CFTC-regulated exchange that offers trading in cryptocurrency Spot and Futures markets. It offers trading of both Cash-settled and Physically-settled contracts in Bitcoin and Ethereum. This makes it easier for traders who would like to explore both Physically-settled and Cash settled Futures contracts as they can get them on the same platform.
LedgerX is a regulated exchange and clearinghouse that offers trading and clearing of Futures and Options on Bitcoin.
The contracts that are available on the platform are mini Futures contracts that allow you to begin trading with as less as 0.01 BTC.
Here you can find contracts with expiries for the next two consecutive months and the next two quarterly months, which are physically settled at the time of expiry. Ethereum Futures are also coming to the platform soon.
It is important to note that not all platforms may be available to all investors, as some have specific requirements or restrictions.
You should also conduct your own research and due diligence before trading crypto Futures on any platform.
How to choose the best exchange to trade crypto Futures in the USA?
Choosing the best exchange to trade crypto Futures in the United States depends on your individual needs and preferences. Here are some factors to consider when making your decision:
Make sure the exchange is registered with the Commodity Futures Trading Commission (CFTC) and complies with all relevant state regulations also.
This is especially necessary when authorities like the CFTC and SEC are very proactive in passing new regulations and banning any exchanges that do not comply.
If you do happen to be trading on any of these newly banned exchanges, there will be a certain time in which you will need to close your positions and withdraw all your funds from it before the assets are frozen for good.
Compare the fees charged by different exchanges, including trading fees, overnight financing fees, and withdrawal fees.
With perpetual crypto Futures, one of the biggest fees will be paid in the form of a Funding fee that the exchange uses to make the spot and Futures prices converge.
When the funding fee is negative, the traders holding short positions will pay the ones holding the long positions when the funding countdown ends.
When the fee is positive, the traders holding long positions pay the ones holding the short positions.
Consider the platform’s usability, user interface, and order types so that you are able to make your trades quickly. Check if the platform offers an API for automated trading or copy trading feature if that is your trading style.
A good platform should be easy to use and navigate and should offer different order types like Limit, Market, Stop Limit, and Stop Market orders.
To make sure there is enough liquidity to execute your limit trades, it is necessary that the exchange has a deep order book.
Look for exchanges with high trading volume and order book depth to ensure that you can easily enter and exit trades.
Barring this, you run a chance of slippage and getting orders filled at a worse price than you had originally planned.
Ensure that the exchange has a good reputation for security and that they take and have taken measures in the past to protect users’ assets such as cold storage and multi-sig withdrawal process.
If there is any news of them having been hacked in the past, it is better for you to steer clear of them.
- Customer support
Look for exchanges that offer good customer support in case you have any questions or issues.
This will put you at ease when using the exchange that, in case something does go bad, there is a dedicated team to assist me in setting it right.
- Available cryptocurrencies and trading pairs
Make sure that the exchange offers the crypto Futures you want to trade and the trading pairs you are interested in.
The risk-reward ratio is very high when you trade pairs that are out of the top 20 list of coins in the market. But if the exchange you use does not have these available, you do not get the chance to invest and trade in them.
Explore the exchange to see the maximum leverage offered on the platform and if you have the option of placing cross-margin and isolated-margin trades.
If the power of leverage is used properly and combined with an astute sense of technical analysis, it can help you earn and multiply your profits quickly.
But there is also an increased risk of losses if the price action does not go your way. Thus, it is necessary to be aware of the maximum leverage allowed on the platform and the related policies of the exchange.
- Deposits and Withdrawals
Select an exchange that makes it easy for you to both deposit and withdraw fiat and crypto from it.
If the hassle of getting money on and off an exchange is laborious and cumbersome, it is generally not worth going through.
There are enough exchanges providing the same services to choose from.
- Historical Data
Something that is not necessary but a ‘good to have’ is the availability of historical data.
Traders often use this to backtest their strategies and to help their future decision-making as well.
A lot of technical analysis is based on historical data, and it helps you identify better your entry and exit points for a profitable trade.
It is important to conduct your own research and due diligence before choosing an exchange to trade crypto Futures.
It is also important to be aware of the risks involved in trading crypto Futures and only invest what you can afford to lose.
Trading crypto Futures in the USA is now more popular than ever, and the number of platforms offering these services is increasing proportionally.
With the CME and ICE exchanges already popular for Futures contracts for metals and agricultural products, it just gives investors another avenue to diversify their trading portfolio.
Investors need to understand that they should consider the most up-to-date regulatory status of the exchange they are going to be working with, as these rules keep changing frequently.
Again, as with most other investment avenues, only invest what you are comfortable losing.