What is a Bitcoin contract

Bitcoin futures contracts are cryptographic asset contracts with BTC as the trading target. Cryptographic asset contracts are one of the cryptographic asset derivatives. Cryptographic asset contract trading is the behavior of buying and selling parties agreeing to trade a certain asset at a specified price and quantity in the future and obtaining profits.

Contracts can be long or short. Taking the BTC/USDT contract trading pair as an example: going long means predicting that the future market of BTC will rise. You can buy first and sell later to earn the price difference in between; going short means predicting that the future market of BTC will fall. Traders can borrow BTC from the contract trading platform, sell it at the current price, and then buy back the same amount of BTC at a lower price to return to the platform. This way, they can earn the price difference profit. Therefore, in contract trading, whether the market goes up or down, as long as the chosen direction is correct, there is an opportunity to make a profit.

In contract trading, whether long or short. Any newly established position is called opening a position, and after opening a position, the held position is called holding a position. Bulls sell the previously bought position, or bears buy the previously sold position, which is called closing a position.

Contracts are measured in 'lots', and the face value of each lot varies depending on the underlying asset. Of course, users can also set the pricing method to be based on the 'quantity of the currency' according to their trading habits.

In addition to the above concepts, you also need to understand the margin mechanism of the contract before the formal transaction, including the initial margin and maintenance margin. The initial margin is the minimum amount required to open a position, usually calculated by dividing the order value by the leverage and adding the opening and closing fees. The maintenance margin is the minimum amount required to maintain the existing position, usually half of the reciprocal of the maximum leverage. It should be noted that once the position net value is lower than the maintenance margin, a forced liquidation will be triggered.

Image source:Gate.io Official Website

How to conduct Bitcoin futures trading

Step 1 Select the contract trading pair:

Log in to the Gate.io official website, click on [Contract]-[Perpetual Contract]-[USDT Perpetual]. Enter the perpetual contract trading page, click on the trading pair button in the upper left corner of the page, and select the currency pair you want to trade.

Step 2 Fund Transfer:

In classic account mode, click the 'Funds Transfer' button in the lower right corner to transfer assets from the Spot Account to the Contract Account.

Step 3 Adjusting the leverage ratio

When conducting contract trading, you can choose between full-position or isolated-margin modes. If you choose 'full-position', the margin for all full-position trading pairs will be shared. If a margin call occurs for any trading pair, all full-position assets will be liquidated.

When selecting Cross Margin mode, each trading pair corresponds to an independent position with isolated margin and separate profit and loss calculation. If liquidation occurs for one trading pair, it does not affect positions in other trading pairs.

When conducting contract trading, leverage ratio setting is also required. You can choose a leverage of 1-100 times. The higher the leverage ratio, the lower the initial margin required for opening a position, and the higher the capital utilization. At the same time, the risk of liquidation is also higher. Please set the leverage ratio reasonably and pay attention to risk control at all times.

Step 4 Open Position Order:

Common order types used when opening a position include: [Limit][Market] or [Planned Order].

Limit order trades at the price and quantity specified by the user. The limit order is executed only when the market price reaches or exceeds the specified limit.

Market order executes at the best available price in the order book and is the fastest way to place an order. Due to price fluctuations, the final execution price may be better or worse than the expected price.

Planning commission, that is, only when the market price reaches the trigger price, will the transaction be conducted according to the specified commission price, commission quantity, and buy/sell direction. The triggering price can be the latest transaction price or the mark price.

Taking a limit order as an example, input the price and fill in the order quantity, and confirm the opening direction. Click 'Buy Long' for bullish and 'Sell Short' for bearish to complete the order.

Step 5 Close Position:

After opening a position, click 'Positions' at the bottom of the page to view your position information. Please always pay attention to the 'liquidation price' or set 'take profit/stop-loss'. When the expected profit is reached, you can click 'Close' to complete the closing operation, which is consistent with the opening steps. Choose 'Market Order', 'Limit Order', or 'Close All' to complete the closing operation.

Characteristics of Bitcoin contracts

Compared to traditional stock and commodity futures markets, the Bitcoin futures market has the following advantages and characteristics:

1. Features: cryptographic assets do not require permission, the market operates 24/7, and the volatility is high

The primary characteristics of the cryptocurrency market are decentralization and permissionless, unlike traditional internet markets that may have membership restrictions and other access limitations. In a permissionless market, anyone can create and publish cryptographic assets and trade in the market, which greatly enhances the overall ecosystem of the cryptocurrency market.

In the crypto market, trading continues 24/7, 365 days a year, allowing buying and selling at any time; T+0 immediate trading enables multiple entries and exits within the same day, increasing profit opportunities; there are no daily limits on price fluctuations, allowing for unlimited profit potential.

2. Commodities: A rich array of investment products covering wealth management, spot, and derivatives

The cryptocurrency market, which started in 2010 on BitcoinTalk, has grown to over $1 trillion in size. As the market matures, the entry barrier for cryptocurrency trading has gradually lowered, making it easier to operate and with more advanced trading systems and improved risk management mechanisms. Investment products in the market have evolved from spot trading to a comprehensive system that includes spot trading, leverage trading, derivatives trading, and investment management, providing investors with a wider range of choices and strategy combinations.

3. Forward-looking: Emerging markets and industries are developing rapidly, with opportunities and risks coexisting in the market.

The trend of encrypted assets is good, and digital assets represented by BTC are booming globally, showing strong investment appeal and a promising future. The entire encrypted asset market is a natural speculative market, a paradise for risk speculators to freely engage in combat.

The principles and related concepts of Bitcoin contract products

With the development of the entire cryptocurrency industry, more and more market participants are involved and the market is growing. The cryptocurrency futures market has also made significant progress. According to relevant institutions, the scale of the cryptocurrency futures market is above trillions of dollars. The common types of cryptocurrency futures contracts in the market mainly include the following two:

Perpetual Contract

1. Concept of Perpetual Contract: Gate.io Perpetual Contract is a type of cryptocurrency derivative product where users can profit from the increase or decrease in cryptocurrency prices by choosing to go long or short on the contract based on their predictions of the market movements.

2. The difference between futures and spot

3. Differences between perpetual contracts and traditional futures contracts

4. Difference between USDT perpetual contract and Coin perpetual contract

Futures Contract

Gate.io futures contract is a type of cryptocurrency derivative, currently supporting contract trading settled in USDT (USDT-margined) and BTC (BTC-margined).

Futures contract is a contract to buy or sell the underlying assets at an agreed price on the future delivery date (this week, next week, this quarter). It differs from perpetual contract in that futures contract has a delivery date (i.e., the contract will expire). When the futures contract expires, both parties to the contract are obliged to fulfill the contract and complete the delivery.

Differences between perpetual contracts and futures contracts, now let's see what the differences are:

After understanding the relevant concepts and operation guidelines of Bitcoin contracts, you can now start your journey of Gate contract trading.Place an immediate order for BTC/USDTTrading pair!

Summary

Bitcoin contracts, as one of the trading products in the cryptocurrency derivatives market, are widely popular in the cryptocurrency market and have developed into a mature market with a trillion-level scale. Due to its natural characteristics, it has become a paradise for speculators. While enjoying the high returns brought by its high volatility and high leverage, one should also never forget its high-risk nature, properly plan assets, manage risks, and adjust mentality in order to survive in the harsh market.

Disclaimer
This content is for reference only and does not constitute investment advice. Contract trading carries high risks and may result in capital loss. Please participate cautiously according to your own risk tolerance. Trading is risky, investment needs to be cautious.