- What Is a Bitcoin Exchange?
- What is a Bitcoin Futures Trading Exchange?
- How to trade Futures in the Exchange?
- JEX Exchange
What Is a Bitcoin Exchange?
Bitcoin volatility has been a great concern among potential investors and traders.
The huge fluctuations have mainly been due to the lack of confidence in the bitcoin system, its fragile reputation, and its stark reaction to bad news, which often leads to a steep price drop, before rising again. The wild fluctuations have calmed down a bit.
While volatile movements take away the attractiveness of any asset, a certain amount of swing in price creates trading opportunities.
This is something that many traders and speculators have been taking advantage of by buying the digital currency and then selling at a profit through an exchange.
The whole process makes bitcoin exchanges an important part of the ecosystem since it facilitates the buying and selling of bitcoins, as well as futures trading.
A bitcoin exchange operates some what similarly to online stock trading brokers, where customers deposit their fiat currency (or bitcoins) to carry out trades.
However, not all bitcoin exchanges offer such services.
Some exchanges are more like wallets and thus provide limited trading options or storage of currency (both digital and fiat) for trading.
The bigger and more elaborate exchanges offer trades between different cryptocurrencies, as well as between digital and fiat currencies. The number of currencies supported by an exchange varies from one exchange to another.
Typically exchanging is done through matching the buy and sell orders placed on the system of the exchange.
The sell orders are made at an offer price (or ask) while the buy order (or bid) is made to buy bitcoins.
It is similar to buying stocks online where you need to enter the desired price (or market price) for buy/sell along with the quantity.
These orders enter the order book and are removed once the exchange transaction is complete.
Anyone interested in buying bitcoins needs to deposit funds in U.S. dollars, euros, or another currency supported by the exchange.
The popular methods of transferring money to the currency exchanges are through bank wire transfers, credit cards, Alipay, or liberty reserves.
One of the pre-requisites here is to have a digital wallet to hold bitcoins.
Bitcoins bought can be stored in a digital wallet, device, or paper wallet, depending on the buyer’s preference.
For sellers, the fait currency for which the Bitcoins have been sold needs to be withdrawn from the exchange and sent to a bank.
One issue that can arise is if the exchange has liquidity concerns at a particular point in time; such situations can delay withdrawal and transfer of funds into a bank account.
What is a Bitcoin Futures Trading Exchange?
Some exchanges offer trading on margin.
When such an option is available, Bitcoiners are allowed to borrow funds from peer liquidity providers to carry out trades.
The term "liquidity provider" refers to those who are ready to deposit their bitcoins and/or dollars with the exchange for use by others for a certain pre-fixed duration, rate, and amount.
For example, say a Bitcoiner wants to buy 20 Bitcoins, anticipating that its price would rise in future and thus hopes to profit by selling them at a later date.
If the person does not have sufficient funds to buy the 20 bitcoins, the margin facility allows him to borrow the amount required (20 X the price of bitcoins in USD) from a liquidity provider.
When the Bitcoiner chooses to close the position, he needs to repay the amount borrowed plus the interest accrued during this time period.
Remember that the amount accrued (loan + interest) needs to be reimbursed regardless of profit or loss at the time of settlement.
Additionally, a maintenance margin needs to be maintained in the trading account used to cover the losses incurred during trading.
As the account gets depleted, a margin call is given to the account holder.
How to trade Futures in the Exchange?
A futures contract is a technique to hedge positions and reduce the risk of the unknown.
It is also used for arbitrating between current spot and future contracts.
In the case of bitcoins, futures have been more associated with miners who face the risk of unknown future prices.
JEX(web: jex.com), a futures marketplace sells millions of futures contracts each month.
A typical instrument would look like this: BTCUSDT.
Here "BTCUSDT" signifies the rate of exchange between Bitcoin and USDT
In a futures market, if the price is 12000, it means each Bitcoin futures contract worth 12000 USDT.
If an investor wishes to open a positive position then he goes long with “buy" contracts, and if he decides to open a negative position, he goes short with “sell” contracts.
An investor’s position can be either positive or negative for the same instrument.
A Bitcoin (spot or futures) exchange (like any online trading firm) charges its clients a fee to carry out trading activities.
As exchanges face the risk of hacking and theft, it is wise not to trust an exchange with all your coins.
You should split and keep part of them in other devices or cold storage.
Now with bitcoin futures being offered by some of the most prominent marketplaces, investors, traders and speculators are all bound to benefit.
These centralized marketplaces will facilitate trade based on a trader’s outlook for bitcoin prices, gain exposure to bitcoin prices or hedge their existing bitcoin positions.
Overall, the launching of bitcoin futures by JEX will facilitate price discovery and price transparency, enable risk-management via a regulated bitcoin product and give a further push to bitcoin as an accepted asset class.
If you have a interesting in trading Bitcoin, Ethereum, EOS or other cryptocurrency futures in a professional exchange, JEX Exchange would be a good choice.
It’s the leading Bitcoin futures & options trading exchange in the world.
It's official website is as follows www.jex.com
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