As in traditional (stocks, forex) financial markets, for cryptocurrencies, there are various derivative instruments one can use to speculate on rising and falling markets. This article shall give you an overview of products currently existing and assumes you already have some knowledge about these advanced instruments. Its focus is on "pure crypto" exchanges with the ability to deposit/withdraw crypto funds (eToro is an exception here, see below).
But I will give just a short definition of What is derivative trade?
Derivative trade is financial security with a value that is reliant upon or derived from an underlying asset or group of assets. ... The most common underlying assets include stocks, bonds, commodities, currencies, interest rates, and market indexes. Derivatives can either be traded over-the-counter (OTC) or on an exchange. (definition from google)
Maker and Taker Fees
On of the advantages of derivatives trading are low fees. Some spot and most derivative exchanges have different fee schedules for makers and takers.
A Maker is a patient trader who places a buy/sell offer in the order book through limit orders, where the price of this limit orders must not match the best price of the other side. To ensure an order actually appears in the order book (and does not execute instantly) exchanges allow to flag orders as "post only" or "maker only".
A Taker is an impatient trader who wants instant execution by placing market orders. Usually, takers pay a higher commission than makers; and they cross the spread, which can have a bigger impact than fees in rather illiquid markets.
The following table lists some popular exchanges. "Swaps" refers to "Perpetual Swap Contracts", a contract type without expiry to emulate spot trading.
|Exchange||Products||Underlying||Leverage||Maker/Taker Fees (%)||Base Country|
|BitMEX||Futures, Swaps||BTCUSD,ETHUSD & Alts/BTC||x100, x50, x20||
BTC,ETH: -0.025 / 0.075
|Deribit||Futures, Swaps, Options||
ETHUSD (Since 19/Mar/2019)
x100 (BTC), x50 (ETH)
|-0.025 / 0.075||Netherlands|
|Gate.io||Swaps||BTC, ETH, and Alts||x100, x20||-0.025 / 0.075||China|
|OKex||Futures, Swaps||BTC, ETH, and Alts||x100||0.02/0.02||China|
|Huobi DM||Futures||BTC,ETH,EOS,LTC||x100||0.02/0.03||Hong Kong|
|Kraken||Futures, Swaps||BTC,ETH,LTC,BCH,XRP to USD||x100||-0.03/0.075||US|
|Bibox||Swaps||BTCUSD, ETHUSD||x100||-0.025 / 0.075||China|
|Etoro||CFD||various||x1, x2||various (high spread)||Cyprus|
Industry leader. The XBTUSD perpetual contract is the most liquid BTC/USD market. Its price rarely differ from the spot BTC price. ETHUSD quanto perpetual contract has similar liquidity. BitMex offers various other futures and exotic UP/DOWN contracts. All transactions are BTC settled, there is no USD (or stablecoin) account. To preserve your account value-neutral to USD you can open an x1 short of XBTUSD (e.g., if you have 2 BTC in your account and BTC price, is $4000 you stay short 8000 contracts).
Deribit has a BTC/USD perpetual contract which emulates the XBTUSD at BitMEX. Since March 19th, 2019 they are opening the ETH/USD perpetual pair and Futures, at a x50 leverage maximum initially (with plans of updating it to x100 when the volume rises) Fees are equal, a notable difference is that funding fees are applied continuously, whereas at BitMEX they apply every 8 hours. As of March 2019, the trading volume is roughly a tenth of the BitMEX volume. They have a sub-accounts system with free transfers between them, which are treated like totally separate accounts, this is the way they have to reduce your leverage, with balance exposure at x100 (always fixed), this also allows you to hedge and keep short and long positions simultaneously. Deribit offers three BTC or ETH futures and various European Vanilla Style options.
Since December 2018 you can trade perpetuals for BTC, ETH and more than 10 other altcoins (including WAVES and BitTorrent). Like on BitMex margin must be given in BTC. Parts of the GUI clearly emulate BitMEX's interface. Liquidity varies a lot across contracts and during the time. Nice maker rebates.
Besides margin trading OKex has various future contracts wich settle weekly, bi-weekly or quarterly. In Jan 2019 they added Perpetual contracts, which are not very handy to trade. All contracts are inverse, meaning that they require margin in the underlying currency. So you have to buy their underlying first, transfer funds to each of the swap accounts. There are no stop loss orders which is insane considering a possible x100 leverage. High maker fees for normal accounts (see their schedule), no Post-Only orders. You place Market orders through limit orders with a confusing flag named “BBO”. You can hold long and short positions for a single contract at the same time. Consider trading altcoin contracts on Gate.io instead.
In November 2018 Huobi launched a futures trading platform. Here you can trade BTC, ETH, LTC, and EOS futures with weekly, bi-weekly and quarterly settlement. As of March 2019, the quarterlies are most liquid, with $5M - $10M daily trading volume. High trading fees.
Kraken acquired Crypto Facilities, a rather illiquid place for futures trading, and re-launched their trading platform in September 2018. Given Kraken’s popularity, the future contracts were still low in trading volume in March 2019.
Trade BTC and ETH perpetuals on bibox. The GUI is simple, good liquidity.
The best place to trade BTC/JPY futures. Good liquidity established product.
Trade crypto CFDs on eToro with very high spreads. No crypto deposit or withdraw, USD only. There is an eToro wallet app but this is not related to their main trading platform. It is listed here because as of March 2019 it is the only noteworthy social crypto trading platform besides BCW.
The list above is not complete, there are smaller exchanges offering contracts. Please post a comment if sth is missing. You can also trade crypto derivates at most traditional platforms, such as IB.
Trade BTC/USD and ETH/USD at BitMEX if you're non-US. Deribit and Kraken are safe alternatives. Consider Gate.io for altcoin perpetual contracts.
Note that crypto derivatives products are not suitable for long-term investments. Future contracts expire and positions you must re-open positions with the new season. Your funds stay at the exchange: in case of an exchange hack or exit scam, they may be lost. Best practice is to keep most of your funds in your cold wallet.
If you want to preserve USD value always stay x1 short BTC/USD.