Three Reasons To Trade COIN-Margined Futures in a Bull Market
Key Takeaways:
Binance offers crypto futures contracts that are settled and collateralized in their based cryptocurrency; these contracts are what is known as COIN-margined contracts.
Investors can trade Bitcoin-margined contracts, which allows them to earn Bitcoin when their futures position returns a profit, making them ideal for long-term holding.
COIN-margined quarterly contracts do not carry a funding fee, which means traders incur fewer expenses when holding derivative positions.
Holding an investment during times of growth can be incredibly gratifying and exciting. Even for spot traders, a bull market is an exciting moment for portfolio growth. In these growing markets, traders seek to maximize their profits utilizing derivatives products such as cryptocurrency futures.
As you may know, trading with derivatives offers investors the opportunity to maximize profits due to the applied leverage for such positions.
During a bull market, it could be advantageous to know how these alternative trading techniques work. For example, COIN-margined futures offer unique features that allow long-term investors to participate in the futures markets without converting their crypto assets to stablecoins. In this article, you will learn why COIN-margined contracts are an excellent trade strategy in bull markets.
1. Earn in Cryptocurrency
Binance offers crypto futures contracts that are settled and collateralized in their based cryptocurrency; these contracts are also known as COIN-margined contracts. For instance, investors can trade Bitcoin-margined contracts, which allows them to earn Bitcoin when their futures position returns a profit.
This is excellent if you are a long-term investor. Investors are more likely to hang on to their cryptocurrencies, especially in the current bull market. Profits from futures contracts may be added to your long-term stack since they are settled in the underlying coin. Furthermore, when prices continue to climb, the value of your collateral will grow in tandem. Simply said, this is an excellent strategy to grow your bitcoin holdings in the long term.
Long-term investors may hedge their positions in the futures market using COIN-margined futures without converting any of their holdings into USDT. As a result, they are not required to sell any cryptocurrency at a loss.
2. No funding fee for Quarterly contracts.
While perpetual contracts are increasingly popular, traders should also consider quarterly COIN-margined contracts in the current growth environment. Unlike perpetual contracts, quarterly contracts do not carry a funding fee. When held for 1-3 month holding periods, traders can expect to avoid funding fees, which would otherwise be incurred in perpetual contracts. Funding fees tend to correlate with the underlying trend of the market. When the market is extremely bullish, funding fees will surge as traders are willing to pay more to go long on a futures contract. Additionally, funding calculations consider the amount of leverage used, which may have a big impact on one’s profits and losses.
On Binance, funding fees are paid between traders, and they are charged every eight hours. Therefore, The accumulated funding fees paid daily adds to the overall cost of holding a futures position. Without funding fees, traders can expect to incur fewer daily expenses, making these sorts of contracts more wallet-friendly and easier to manage.
Also, without the additional costs associated with perpetual contracts, quarterly contracts are likely to be traded higher than spot markets due to the prevalent contango effect in bull markets. When a market is in contango, the price of a futures contract is higher than the spot price.
3. Non-linear Payout
COIN-margined futures have a non-linear payout structure. In a contango market, COIN-margined contracts tend to generate more profits because of the rising value of the collateral.
The graph below shows the profit and loss comparison between a non-linear and linear payout as Bitcoin's price moves by increments of $1000.
As shown, the profit and loss increments of COIN-margined and USD-margined contracts differ. As the underlying cryptocurrency appreciates, COIN-margined contracts generate more profits following the direction of the underlying trend — knowing these unique advantages can help you compound returns and maximize profits.
Bottom Line
Whether you’re a spot or futures trader looking to strategize your every move in the market, you might want to consider Binance COIN-margined futures. These types of trades join the two roads of spot and futures trades together for the investor’s benefit as they are based in a cryptocurrency (like a spot trade), but still utilize the power of leverage (as a futures trade would).
They also combine the best of both worlds for quarterly and perpetual contracts for extended functionality choices. Furthermore, if you decide to use quarterly contracts, you can avoid taking on the funding rates with a perpetual contract. This advantage can help you minimize any holding cost of leveraged positions for the long term.
Although there are several benefits to using a COIN-margined future trade instead of a traditional derivatives trade or a spot trade, traders should always trade with care. As with any cryptocurrency trading, especially with futures trading, it’s incredibly important to trade responsibly. To learn more, sign up for an account at Binance.com.
Read the following Blog Posts and FAQ items for more information:
(Blog) Crypto Futures Risk and Money Management: 5 Things You Can Do to Better Manage Trading Risk
(Blog) Three Benefits of COIN-margined Futures You Need to Know
And many more Binance Futures FAQ topics...
