Three Reasons To Trade COIN-Margined Futures in a Bull Market
Key Takeaways:
Binance Futures offers crypto derivatives contracts that are settled and collateralized in their based cryptocurrency; these contracts are what are known as COIN-Margined contracts.
Investors can trade Bitcoin-Margined contracts, which allows them to earn BTC when their futures position returns a profit, making them a good choice 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 incrase their profits utilizing derivatives products such as cryptocurrency futures.
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 Futures offers crypto derivatives 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 BTC 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 stablecoins like BUSD. 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 Futures, 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 $1,000.
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 optimize 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 Futures’ COIN-Margined contracts. 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 helpful articles for more information about Binance Futures:
(Blog) Three Benefits of COIN-Margined Futures You Need to Know
(Blog) Crypto Futures Trading: Things You Need to Know Before You Begin
(Academy)The Psychology of Market Cycles
And many more Binance Futures FAQ topics…
Disclaimer: Crypto assets are volatile products with a high risk of losing money quickly. Prices can fluctuate significantly on any given day. Due to these price fluctuations, your holdings may significantly increase or decrease in value at any given moment, which can result in a loss of all the capital you have invested in a transaction.
Therefore, you should not trade or invest money you cannot afford to lose. It is crucial that you fully understand the risks involved before deciding to trade with us in light of your financial resources, level of experience, and risk appetite. If required, you should seek advice from an independent financial advisor. The actual returns and losses experienced by you will vary depending on many factors, including, but not limited to, market behavior, market movement, and your trade size. Past performance is not a guide to future performance. The value of your investments may go up or down. Learn more here.