Futures are standardised derivative contracts obligating the buyer to purchase, and the seller to deliver, an asset at a predetermined price on a specific future date. In crypto, futures let traders speculate on Bitcoin, Ethereum, and other assets’ future prices without holding the underlying coin, and they’re used by both retail speculators and institutions hedging exposure. Unlike perpetual futures, standard futures contracts have a fixed expiry date and typically settle in cash on major exchanges like the CME, or in crypto itself on platforms like Binance and OKX.
How futures work: a contract locks in a price today for delivery or settlement later. Key concepts: Expiry date — the set date the contract settles, after which it ceases to exist, unlike perpetual futures, which never expire; Contango/backwardation — futures trading above (contango) or below (backwardation) the current spot price, reflecting market expectations and funding costs; Settlement — cash-settled contracts pay the price difference in dollars or stablecoins, while physically-settled contracts exchange the actual asset; Basis trade — a strategy that profits from the price gap between futures and spot, popular with institutional crypto traders.
Example: A trader buys one BTC futures contract expiring in three months at $62,000, believing the price will rise. If BTC trades at $68,000 at expiry, the contract settles in the trader’s favour for the $6,000 difference, regardless of what spot price does after that date.
Learn more: Investopedia — Futures Contract Definition
