A Bitcoin futures position and a Bitcoin purchase may follow the same market, but they are not the same transaction. In a spot trade, BTC itself is bought or sold. A futures trade deals with a contract whose value is tied to BTC. The same principle applies to futures based on other
cryptocurrencies.
That’s what distincts crypto futures. These contracts belong to the derivatives market, which existed long before crypto and includes instruments linked to currencies, commodities, indices, and other assets.
Futures are now available on a number of crypto trading platforms. WhiteBIT futures is one example, with contracts linked to different digital assets and its own specifications for margin, settlement, and other trading conditions.
A contract instead of the underlying coin
Take bitcoin futures as an example. Opening a position does not mean that BTC is transferred to the trader’s wallet. What changes hands is exposure to a contract linked to the price of Bitcoin.
Futures positions can move in either direction. Long positions increase in value when the contract price rises and lose value when it falls. Short positions work the other way around.
This is generally what the phrase futures trading crypto refers to: trading derivatives based on cryptocurrency prices rather than exchanging the coins themselves.
Because the contract is separate from the underlying asset, its market price can differ from the current spot price. The difference may be small, but the two prices do not have to match at every moment.
Why do some contracts expire?
Traditional futures come with a settlement date. Once that date arrives, the contract is settled
according to its specifications. Until then, its price can reflect both current market conditions and
expectations about where the underlying asset will trade by expiry.
Crypto markets also make extensive use of contracts that remove the expiry date altogether.
These are known as perpetual futures.
A perpetual contract can remain open without waiting for a scheduled settlement date. That creates a practical question: without expiry, what keeps its price connected to the spot market?
Funding is one of the mechanisms used for this purpose. At regular intervals, payments can pass between traders holding long and short positions. The calculation is based on the relationship between the perpetual contract and its reference market. The exact formula and funding schedule vary by platform.
Margin is another part of the equation
Futures positions are commonly opened using margin. Rather than providing funds equal to the full value of a contract position, a trader allocates collateral to support it.
This is also where leverage comes from. A position may have a larger notional value than the margin behind it. As a result, a movement in the contract price can produce a proportionally larger change in the available margin.
Every platform defines the amount of collateral required to maintain an open position. If that requirement is no longer met, the position can be liquidated according to the contract rules.
Terms such as maintenance margin, liquidation price, funding rate, and leverage all come from this structure. They describe how the derivative works, not characteristics of Bitcoin or another underlying cryptocurrency.
The same general mechanics apply across many derivatives markets, although the details are not universal. WhiteBIT futures, for example, operate according to the specifications set for contracts on that platform. Other venues may use different margin requirements, funding intervals, or contract sizes. This is why a futures market is more than another place displaying a crypto price: it is a separate market built around contracts linked to that price.
The above information does not constitute any form of advice or recommendation by London Loves Business for investment, nor is it intended as investment advice, financial advice, or trading advice. Cryptocurrency mining and staking involves risk. Don’t invest unless you’re prepared to lose all the money you invest. This is a high-risk investment and you are unlikely to be protected if something goes wrong. Take 2 mins to learn more. It is strongly recommended you practice due diligence, including consultation with a professional financial advisor, before investing in or trading cryptocurrency and securities.
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