Cryptocurrency futures are a type of derivatives contract. A futures contract is a legal agreement to buy or sell something at a predetermined price at a specified time in the future. In the case of cryptocurrency futures, the underlying asset is a cryptocurrency like Bitcoin, Ethereum, or others.
The person agreeing to buy the underlying asset, in this case, the cryptocurrency, is said to have a “long” position, while the person agreeing to sell the asset is said to have a “short” position.
Crypto futures can be used for hedging or speculative trading. For instance, if you are a Bitcoin miner and want to lock in a selling price for a future date to protect yourself against potential price drops, you might use futures contracts. On the other hand, a trader might use crypto futures to speculate on price movements and potentially profit from correctly predicting whether prices will rise or fall.
Futures contracts are traded on futures exchanges, which in the world of crypto include platforms like Binance Futures, OKEx, CME Group (which offers Bitcoin and Ethereum futures), and others.