Bitcoin Futures v Spot: A Tale of Two Bities.
It was the best of trades, it was the worst of trades. Look, I had to get that one in.
This update is a quick answer to an email received on CME micro bitcoin futures. To trade or not to trade?
Answer: there are pros and cons here.
Some points:
Commission example: Crossing the spread (buying 1 and selling 1 at market) in the micro burns $6 in price plus say $2 for (expensive) comms round turn. That’s $8 to play a contract size of $4535. That’s in and out.
For spot, Kraken for example charge up to 0.26% to buy or sell at market. Even getting in and out at the same price, would cost $23.58 for the same sized trade as the futures. So three times the fees even when the spread size is covered. Coinbase fees are 0.50%.
Comms from one broker/platform to the next very of course and they vary over time, but that’s an interesting example.
Futures downside: liquidity at this stage, but that will change. It’s a new contract. With futures, you also have to pay monthlies for platform and data. Some brokers offer free basic platforms, but the data still costs. Trading once or twice does not make it worth the bother. Spot platforms and spot data do not seem to draw a monthly (for now, but you watch).
Futures are more for active traders where comms matter. Spot is a better option for long term HODLers. Pros and cons.
Not all points covered here. It’s just a start. The CME Groupo site have some great info on futures.
Please like & follow for more updates and dumb references.
This update is a quick answer to an email received on CME micro bitcoin futures. To trade or not to trade?
Answer: there are pros and cons here.
Some points:
- Micros are very algo driven with the May contract currently looking heavy from just one participant stacking bids and offers. Weird. That will change.
- Not trading a lot of volume yet. That will change.
- Full sized contract (equals 5 bitcoins), with margin close to 100k, is too rich for most.
- Micro contract (1/10th of a BTC) is a good entry level size.
- Wider bid/ask spreads on all futures contracts compared to spot. It will change should the product develop.
- Futures have far lower comms than spot coins.
Commission example: Crossing the spread (buying 1 and selling 1 at market) in the micro burns $6 in price plus say $2 for (expensive) comms round turn. That’s $8 to play a contract size of $4535. That’s in and out.
For spot, Kraken for example charge up to 0.26% to buy or sell at market. Even getting in and out at the same price, would cost $23.58 for the same sized trade as the futures. So three times the fees even when the spread size is covered. Coinbase fees are 0.50%.
Comms from one broker/platform to the next very of course and they vary over time, but that’s an interesting example.
Futures downside: liquidity at this stage, but that will change. It’s a new contract. With futures, you also have to pay monthlies for platform and data. Some brokers offer free basic platforms, but the data still costs. Trading once or twice does not make it worth the bother. Spot platforms and spot data do not seem to draw a monthly (for now, but you watch).
Futures are more for active traders where comms matter. Spot is a better option for long term HODLers. Pros and cons.
Not all points covered here. It’s just a start. The CME Groupo site have some great info on futures.
Please like & follow for more updates and dumb references.
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