In the past two years futures contracts have become widely popular among cryptocurrency traders and this became more evident as the total open interest on derivatives more than doubled in three months.
Additional proof of their popularity came as futures turnover surpassed gold, which is a well-established market with $107 billion in daily volume.
However, each exchange has its own orderbook, index calculation, leverage limits and rules for cross and isolated margin. These differences might seem superficial at first, but they can make a huge difference depending a traders’ needs.
Open interest
While Binance futures hold the larger share of this market, a number of competitors have relevant volumes and open interest, including FTX, Bybit, and OKEx. Some differences between exchanges are obvious, such as FTX charging perpetual contracts (inverse swaps) every hour instead of the usual 8-hour window.
Stablecoin versus token-margined contracts
As for the crypto exchanges, most will allow up to 100x leverage. Tether (USDT) orders are usually denominated in BTC terms. Meanwhile, the inverse perpetual (token margined) order books are displayed in contracts, which might be worth $1 or $100 depending on the exchange.
Variable funding rates
Some exchanges allow clients to use very high leverage and while this might not pose an overall risk as liquidation engines and insurance funds are in place for these situations, it will pressure the funding rate. Thus, longs are usually penalized on those exchanges.
Even a 0.05% difference equals 1% in additional costs per week, meaning, it is essential to compare the funding rate every once in a while, especially during bull markets when the fee tends to escalate quickly.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.
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