Have you been looking for a way to join the ever-growing Bitcoin market? Micro Bitcoin futures
offer a cost-efficient means for Bitcoin. While you have heard of the Bitcoin Futures contract,
Micro Bitcoin futures are new futures contracts that allow traders to choose positions for
movements in the price of Bitcoin. This article explains Micro Bitcoin futures, their features, and
why you should trade MBT.
Features of Micro Bitcoin Futures
Micro Bitcoin futures are regarded as game changers because of the benefits they offer to traders
who seek to find their way into the Bitcoin market. Traders could easily trade Bitcoin futures
without much commitment and less risk. Some of the critical features of Micro Bitcoin futures
include;
- Smaller Contract Size: MBT is not only called Micro for no reason, it offers a smaller contract size. Micro Bitcoin futures are 1/10th of one Bitcoin. It also offers a smaller size of the standard Bitcoin futures contract, making it 1/50th.
The good thing about the smaller contract size Micro Bitcoin futures offer is that it gives traders
a more efficient way to hedge the Bitcoin price risk while gaining exposure to the Bitcoin
market. Apart from smaller contract size Micro Bitcoin futures offers, the contracts are also
settled on the last Friday of the contract month at 4:00 pm with cash. The cash settlement policy
is based on the CME CF BRR reference rate.
- Smaller Capital Required: You only need a small capital to start trading Micro Bitcoin futures than the leading Bitcoin. Also, the trading hours are from Sunday to Friday from 5:00 pm to 4:00 pm CT.
The smallest tick increment in Bitcoin is $5. Hence the smallest tick value is $5 * 1/10th Bitcoin
= $0.50. If the latest trading price of Micro Bitcoin futures was 55,850, the next tradeable price
lower would be 55,845, and above would be 55,855.
- Flexibility: Micro Bitcoin futures offer traders flexibility. You can always match your price expectations to several time frames. This is only possible because the Micro Bitcoin futures contract is set to six consecutive monthly basis.
Due to MBT's flexibility, you can decide to roll your position forward if you still want to keep
your position beyond the time frame. Through a calendar spread, you can roll your position to
the next month. The calendar spread convention for MBT futures is the same as for stock index
futures.
A calendar spread allows a trader to exit a contract that is about to expire and enter a deferred
contract by selling one month and buying the next month in two consecutive transactions. A
trader's bitcoin futures position can be prolonged by one month or more using a calendar spread,
depending on which delayed contract he rolls into.
- Centralized Marketplace: Micro Bitcoin futures are listed at the CME Group. You can trade MBT on a centralized exchange that supports it. MBT futures are traded on the CME's Globex electronic trading system, which is highly secure and redundant, with a single central limit order book.
Why Trade Micro Bitcoin Futures?
Micro Bitcoin futures offer several opportunities for traders who seek to trade a less risky asset
with a flexible time frame. Here are a few reasons why you should consider trading Micro
Bitcoin Futures;
- Low financial commitment: There is no financial commitment when trading Micro Bitcoin futures. You can always opt-out whenever you want. You can also choose to roll your position forward if you still want to continue your position.
One of the advantages of futures trading is that it has built-in capital efficiency or leverage. To
put it another way, to hold a futures contract, you only need to put up a portion of the money that
the futures contract represents. Traders are obliged to put up a fraction of the notional value of
the Bitcoin futures contracts they hold as a deposit.
- Price transparency for all market participants: Micro Bitcoin futures offer price transparency for all market participants, including the settling price. Also, if you are curious as to how much Bitcoin exposure you get for trading Micro Bitcoin futures, you should know that MBT only represents one-tenth of the value of Bitcoin. So, you will be holding 10% of the value of Bitcoin if you trade a single futures contract.
- Flexibility: Micro Bitcoin futures offer flexibility regarding the time needed to trade. You can match your price expectations to several time frames due to the six consecutive month future contracts Micro Bitcoin offers.
- Greater risk control: the smaller contract size Micro Bitcoin futures offer aims to enhance risk control. This ensures that investors who lack excess capital and are afraid of risks can trade and gain exposure to Bitcoin.
How to Get Started with Micro Bitcoin Futures
- Open an account: To start trading Micro Bitcoin futures, you need to create an account with a futures broker. While choosing a broker, you want to ensure that they are licensed to trade futures.
- Select futures contract month: After you have selected a futures broker, you will be required to select the futures contract month you wish to trade. Futures are different from trading cash cryptocurrencies in that they reflect a contract to purchase or sell a commodity or financial asset at a future date. When trading a Futures contract, you need to choose an expiration date that represents the day your contract will expire and be settled with cash. When your contract expires, you will no longer be able to retain your position. Micro Bitcoin futures are cash-settled, which means you are not getting Bitcoin.
Conclusion
Futures are derivatives that oblige the buyer and seller to execute the transaction on a given date
and at a specified price, regardless of market value. Micro Bitcoin futures are safe and can easily
be traded on any futures broker. It only requires a low financial commitment, so you don't need
excess capital to get started. Traders also get to enjoy greater risk control.
