How much money you need to trade Futures contracts of either Bitcoin or any of the other altcoins will depend largely on the platform you use and which contract you choose to trade.
While some exchanges need your account to maintain a minimum account balance, some require you to maintain a minimum trade size for a trade to be valid.
For example, a Bitcoin Futures contract offered by the Chicago Mercantile Exchange requires you to trade a minimum of 5 BTC.
Your financial investment in crypto Futures will need to take into account your trading objectives, personal risk-taking capabilities, and the T&Cs (Terms and Conditions) of the trading platform of your choice.
So do take some time to find answers to these questions and thoroughly read the platform’s T&Cs before you make your first Futures trade.
In this article, we will explore some of the key considerations that you should take into account when determining the amount of capital you will need to start trading Bitcoin and crypto Futures.
Trade Bitcoin & Crypto Futures
- Centralized crypto exchanges
Exchanges like Binance Futures, Bybit, and Kucoin offer a wide variety of Bitcoin and other crypto Futures contracts. Traders can use the services of these exchanges to either transfer fiat money or cryptocurrencies from a wallet or another exchange.
You can then decide how you want to use these funds. Binance offers two modes, one being the Isolated margin mode, where the rest of the money in your wallet is safe, and a liquidation event only costs you the invested capital.
The other mode is Cross Margin, where all of your wallet balance is used to calculate the liquidation price. In case of a margin call, extra capital will be used from your wallet.
Keep in mind that there is no amount of minimum funds that you need in your account to start trading. You can get started with as less as $50, as this will help you learn the ins and outs of the Futures trading game.
Just make sure that your margin requirements are met in both the isolated and cross-margin modes so that you can avoid liquidation.
- Chicago Mercantile Exchange
One of the most popular ways for institutions and hedge funds to gain exposure to Bitcoin and Ethereum without actually owning them is trading the Futures contracts on the CME platform.
With contracts expiring in the next six consecutive months and the next two December, it provides flexibility to traders when it comes to their investment horizons and risk-taking abilities.
The contract mandates a minimum position size of 5 Bitcoin, and the contracts are settled in cash once the contracts expire.
Want to trade on CME? Know Bitcoin CME Gap
- Bakkt
If you do not want to settle your Bitcoin Futures contracts in cash, and are looking to take physical delivery upon expiry, you should trade the Bakkt Bitcoin Futures contract on the NYSE (New York Stock Exchange).
Here the contract mandates a minimum position size of 1 Bitcoin.
Use of Margin and Leverage trading
- Margin trading
In general, it is important to have enough capital to cover the margin requirements for the Futures contracts you are trading.
Margin is a form of collateral that is required to hold a Futures position, and it is typically a small percentage of the total value of the contract.
For example, if the margin requirement for a particular Futures contract is 10%, you would need to have at least 10% of the value of the contract in the account as margin in order to trade it.
It is important to note that margin requirements can vary significantly from one margin trading platform to another and from one contract to another.
Some platforms may have higher margin requirements for certain contracts, while others may have lower requirements.
Therefore, it is essential to carefully review the margin requirements for the contracts you are interested in trading and to ensure that you have sufficient capital to meet these requirements.
It is also suggested that you have enough balance in your trading account to support the size and number of your trades.
Your account should also be able to withstand some potential drawdowns or losses. This reduces the risk of your account getting a margin call.
A margin call only happens when the trading account does not have the requisite amount of capital to keep your trading position open.
In this case, you will have to add an additional margin to the trading wallet. If you do not do this, the exchange will liquidate your position, which means all your capital in the position will be lost.
- Leverage trading
An extension of Margin trading, leverage trading allows you to take larger positions in your Futures contracts by borrowing funds from the exchange you are trading on.
It can be a boon if used wisely, but leverage used by someone who is not familiar with the markets can also magnify their losses significantly and rapidly.
If the price of 1 Bitcoin is $17,000 and you have $1,000 to invest in your Futures contract, you can take a position worth 1 Bitcoin by using 17x leverage when you place your order.
Once you close your position, the funds borrowed from the exchange will be returned, and then you can keep the profit earned after paying any other fees.
Conclusion
In addition to the factors mentioned above, there are also a number of other considerations that you should take into account when determining the amount of capital you will need to start trading Bitcoin and crypto Futures.
These may include the level of risk you are comfortable with, your level of experience in trading, and your overall financial situation.
It is always important to carefully consider these factors and to have a clear understanding of the risks involved before starting to trade Futures.
Finally, it is worth noting that trading Bitcoin and crypto Futures carry inherent risks, and it is essential to approach trading with caution.
While there is the potential for significant profits, there is also the possibility of substantial losses.
Therefore, it is important to have a clear understanding of the risks involved and to trade only with capital that you can afford to lose.
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