Bitcoin Derivatives 101: What are They? [2020]

One of the major trends in the cryptosphere in 2019 was the introduction of a new kind of crypto-asset instrument called “Bitcoin Derivatives”.

The popularity of this new way to buy and sell Bitcoin is reflected in the rapid growth of the number of retail and institutional traders who are now using them.

We’re breaking down Bitcoin Derivatives, taking a look at what they are and listing the best platforms that provide Bitcoin Derivative trading.

What are Bitcoin Derivatives?

Bitcoin Derivatives are a way to trade Bitcoin without actually having to own it.

The name “derivative” is common in traditional stock and forex trading, and comes from the fact that the instrument derives its value from the underlying asset - in this case, Bitcoin.

There are types of Bitcoin Derivatives:

Bitcoin Futures

Bitcoin Futures are the first kind of Bitcoin Derivatives, and can be most easily described as an agreement for a trade at some future point in time.

The agreement outlines the asset, amount, price and date of the trade. It is a compulsory agreement that must be made by both parties.

Bitcoin Options

Bitcoin Options are the second type of Bitcoin Future and are very similar to Bitcoin Futures.

Like Bitcoin Futures, Bitcoin Options are an agreement to trade Bitcoin at a set point in time and for a set amount, however there is one key difference.

Bitcoin Options, as their name indicates, are optional. This means that the agreement is available and the trade can be made, but it is not compulsory.

Bitcoin Perpetual Swaps

Bitcoin Perpetual Swaps are the third type of Bitcoin Derivative, and are very similar to Bitcoin Futures.

They carry most of the same characteristics to Bitcoin Futures, but with one key difference - Bitcoin Perpetual Swaps are settled in USD instead of being settled in BTC.

Bitcoin Derivatives Trading Platforms

PrimeXBT

PrimeXBT is the only Bitcoin Derivatives platform to offer up to 100x leverage on all assets that include crypto-assets such as BTC, ETH, LTC, EOS and XRP as well as traditional assets such as commodities, forex pairs and stock indices.

The platform also boasts a strong trading engine that can execute up to 12,000 trades per second at an average rate of under 7.12ms.

PrimeXBT is also equipped with a wide range of sophisticated TA indicators, drawing tools, and advanced order types.

The PrimeXBT aggregator provides feeds from multiple asset vendors, ensuring the highest liquidity on all tradable assets.

KuCoin

KuCoin is an exchange based in Hong Kong that was launched in 2017 and provides its own token called KuCoin.

KuCoin allows holders to take 50% of the fees that KuCoin collects and this a fairly unique token structure and one of the main drawcards for KuCoin users.

The platform suffers from being fairly unknown however, and this is something that should be addressed as right now KuCoin is not one of the major cryptocurrency exchanges.

Saying this, the platform has a relatively nice user interface and is not difficult to use.

In Conclusion: Bitcoin Derivatives 101

Bitcoin Derivatives have quickly become one of the most hyped subsets of financial instruments within the cryptocurrency market.

The opportunity to create positions that do not carry the legal, tax and regulatory restrictions of owning cryptocurrency is very attractive, and as a result many crypto traders are now including derivatives in their activities.