Futures contracts allow to almost perfectly hedge the price risk of digital assets. Assume you own 1 bitcoin which currently trades at 5,000 USD and you want to lock in this price. By selling short 5,000 Futures contracts (each with a contract size of 1 USD), you have locked in the current price, no matter if bitcoin moves up or down.
Note: these examples are for demonstrative purposes only and do not include trading fees nor funding rate payouts.
|EXAMPLE: PRICE INCREASES||Assume you buy back the Futures at 6,000 USD. You incur a loss of ( 1 / 5,000 - 1 / 6,000 ) * (-5,000) = -0.17 bitcoin. Including your original 1 bitcoin, you now own only 0.83 BTC. At the new spot price of 6,000 USD, this is still worth 0.83 * 6,000 = 5,000 USD.|
|EXAMPLE: PRICE DECREASES||Assume you buy back the Futures at 4,000 USD. Your profit is ( 1 / 5,000 - 1 / 4,000 ) * (-5,000) = 0.25 bitcoin. Including your original 1 bitcoin, you now own 1.25 BTC. At the new spot price of 4,000 USD, this is still worth 1.25 * 4,000 = 5,000 USD.|
The decimal and thousands separators shown in this article may differ from the formats displayed on our trading platforms. Review our article on how we use points and commas for more information.