3 things every cryptocurrency trader should know about commodity trading …






Over the past two years, futures have become very popular with cryptocurrency traders and this has become more evident as total open interest in derivatives has doubled in three months.

Another test of its popularity came when futures turnover surpassed gold, which is a well-established market with a daily volume of $ 107 billion.

However, each exchange has its own order book, index calculation, leverage limits and cross and isolated margin rules. These differences may seem superficial at first, but they can make a big difference depending on the needs of traders.

Open interest

Open interest of aggregate futures (blue) and daily volume (black). Bybt

As noted above, total open interest on futures has grown from $ 19 billion to $ 41 billion today in three months. Meanwhile, the daily trade volume exceeded $ 120 billion, more than the $ 107 billion for gold.

Although Binance futures hold the majority of this market, several competitors have relevant volumes and open interest, including FTX, Bybit, and OKEx. Some differences between exchanges are obvious, such as FTX charging perpetual contracts (reverse exchanges) every hour instead of the usual 8 hour window.

Open interest of BTC and ETH futures contracts, USD. Bybt

Notice how CME ranks third in Bitcoin Futures (BTC), despite offering monthly contracts exclusively. Traditional CME derivatives markets are also notorious for requiring a 60% margin deposit, although brokers can offer leverage to specific clients.

Stablecoin and token margin contracts

When it comes to crypto exchanges, most will allow leverage of up to 100x. Tether (USDT) orders are usually denominated in terms of BTC. Meanwhile, inverted perpetual order books (with token margin) are displayed in contracts, which can be worth $ 1 or $ 100 depending on the exchange.

Entry of USDT BTC perpetual futures orders. Bybit

The image above shows that entering Bybit USDT futures orders requires an amount denominated in BTC and the same procedure is done on Binance. On the other hand, OKEx and FTX provide users with a simpler option which allows the customer to enter an amount of USDT, while automatically converting to BTC conditions.

Entry of USDT BTC perpetual futures orders. OKEx

In addition to USDT-based contracts, OKEx offers a USDK pair. Likewise, Binance Perpetual Futures also offers a Binance USD Book (BUSD). Therefore, for those who are unwilling to use Tether as collateral, there are other options available.

Variable financing rates

Some exchanges allow clients to use very high leverage and while this does not pose an overall risk as there are settlement engines and insurance funds for these situations, it will put pressure on the funding rate. . Therefore, buyers are generally penalized on these trades.

8 hour ETH futures finance rate. Bybt

The chart above shows that Bybit and Binance generally have the highest funding rate, while OKEx consistently has the lowest. Traders should understand that there are no rules that dictate this and that the rate can vary between assets or temporarily leverage demand.

Even a 0.05% difference equals 1% overcharges per week, which means that it is essential to compare the finance rate every now and then, especially in bull markets when the rate tends to rise. quickly.

The opinions and opinions expressed here are solely those of the author and do not necessarily reflect the views of Every investment and trade move comes with risk, you need to do your own research when making a decision.

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