In the past two years, futures contracts have become very popular with cryptocurrency traders, and this became more apparent when the total open interest in derivatives more than doubled in three months.
Further evidence of their popularity was that futures sales outperformed the gold market, which is a well-established market with a daily volume of $ 107 billion.
However, each exchange has its own order book, index calculation, leverage limits and rules for cross and isolated margin. These differences may seem superficial at first, but can make a big difference depending on the needs of the trader.
Aggregated futures open interest (blue) and daily volume (black). Source: Bybt
As shown above, the total aggregated open interest in futures rose from $ 19 billion in three months to $ 41 billion today. Meanwhile, the daily traded volume has exceeded $ 120 billion, more than the $ 107 billion of gold.
While Binance futures have 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 the fact that FTX charges hourly perpetual contracts (inverse swaps) instead of the usual 8-hour window.
Open interest for BTC and ETH futures, USD. Source: Bybt
Note that CME occupies the third position on Bitcoin (BTC) futures, even though it only offers monthly contracts. The traditional CME derivatives markets are also notable for requiring a 60% margin deposit, although brokers may offer leverage for certain clients.
Stablecoin versus Token Margin Contracts
As for the crypto exchanges, most allow up to 100x leverage. Tether (USDT) orders are usually denominated in BTC terms. In the meantime, the inverse perpetual (token margin) order books are displayed in contracts that can be worth USD 1 or USD 100 depending on the exchange.
BTC perpetual USDT futures order entry. Source: Bybit
The above image shows that entering Bybit USDT futures orders requires an amount denominated in BTC and the same procedure is taking place at Binance. On the other hand, OKEx and FTX provide users with an easier option that allows the customer to enter a USDT amount while automatically converting it to BTC terms.
BTC perpetual USDT futures order entry. Source: OKEx
In addition to USDT-based contracts, OKEx offers a USDK pair. Binance Perpetual Futures also offers a Binance USD (BUSD) book. Therefore, for those who do not want to use Tether as a security, other options are available.
Variable funding rates
Some exchanges allow clients to use very high leverage and while this may not pose an overall risk as there are liquidation engines and insurance funds for these situations, it will put pressure on the funding rate. Therefore, long positions on these exchanges are usually penalized.
ETH Futures 8-hour subsidy rate. Source: Bybt
The graphic above shows that Bybit and Binance usually have a higher funding rate, while OKEx is consistently the lowest. Traders need to understand that there are no rules that enforce this and the rate can vary between assets or current leverage demand.
Even a difference of 0.05% corresponds to 1% additional costs per week. Hence, it is important to compare the funding rate from time to time, especially in bull markets where the fee escalates quickly.
The views and opinions expressed are those of the author only and do not necessarily reflect the views of Cointelegraph.com. Every step of investing and trading involves risk, so you should do your own research when making a decision.