In simple terms, cryptocurrency derivatives are financial contracts between two or more parties, where the contract's value derives from an underlying asset (such as Bitcoin, Ethereum, or other cryptocurrencies). These contracts represent agreements to buy or sell the asset at a predetermined price on a specified future date.
The crypto derivatives market offers three primary products: futures, options, and swaps.
Crypto Futures
The first mainstream crypto derivatives market was futures, which remains the largest by trading volume today.
A cryptocurrency futures contract is the most basic type, as described above. When entering a futures contract, traders must first decide the contract's duration. Most exchanges offer multiple options, such as weekly, biweekly, monthly, or quarterly contracts.
For example, if a trader opens a weekly BTC futures contract when BTC is priced at $1 per contract (with each contract worth $10,000), they would need 10,000 contracts.
The trader can then choose to:
- Go long (betting the price will rise)
- Go short (betting the price will fall by expiration)
When the contract settles, one trader pays the other based on the price movement. If the trader shorts BTC and the price drops, they profit. Conversely, if the price rises, they incur losses.
Where to Trade Crypto Futures?
One of the best platforms for trading crypto futures is SynFutures, a next-gen derivatives platform that uses synthetic automated market makers (AMMs). Its unique features include:
- Single-asset liquidity provision
- NFT futures trading
- Automated clearing mechanisms
👉 Discover SynFutures’ advanced trading tools
Crypto Options
Options contracts are similar to futures but with a key difference: traders are not obligated to settle at expiration. Instead, they have the right (but not the obligation) to buy or sell at a predetermined price.
In crypto options, traders use:
- Call options (right to buy at a strike price)
- Pump options (right to sell at a strike price)
For example, if a trader buys a BTC call option with a $10,000 strike price and BTC rises to $12,000, they can exercise the option to buy at $10,000 and instantly profit by selling at $12,000. If BTC falls below $10,000, the trader lets the option expire, avoiding losses (except the premium paid).
Where to Trade Crypto Options?
A leading platform is Deribit, offering:
- Leverage up to 100x
- Low premium fees (0.04%)
- A testnet for strategy practice
Crypto Swaps (Perpetual Contracts)
Swaps—also called perpetual contracts—are futures without an expiration date. Instead of converging at expiry, they use a funding rate mechanism to align with spot prices.
Key features:
- Funding fees are exchanged between longs and shorts every 8 hours.
- Fees incentivize price convergence (e.g., if the contract trades below spot, shorts pay longs).
- Profits/losses are settled daily.
Where to Trade Crypto Swaps?
BitMEX is a top platform for crypto swaps, offering:
- Negative maker fees (-0.025%)
- Rebates for liquidity providers
👉 Explore BitMEX’s swap trading
FAQ
Q: What are the risks of trading crypto derivatives?
A: Leverage amplifies both gains and losses. Always use risk management tools like stop-loss orders.
Q: How do funding rates work in perpetual swaps?
A: They balance contract prices with spot prices. If the contract trades below spot, shorts pay longs (and vice versa).
Q: Which is better for beginners—futures or options?
A: Futures are simpler, but options offer more flexibility (e.g., no obligation to settle).
Key Takeaways
- Futures: Obligation to buy/sell at expiry.
- Options: Right (not obligation) to buy/sell.
- Swaps: No expiry; uses funding rates.
For advanced traders, platforms like SynFutures and Deribit provide powerful tools. Beginners should start with small positions and low leverage.