Tag: Futures

BTSE Exchange Review – Futures 2.0, Spot Markets and MoreBTSE Exchange Review – Futures 2.0, Spot Markets and More

Crypto derivatives have seen exponential growth over the past two years. BitMEX still leads the charge. However many newly founded exchanges such as FTX and now BTSE Exchange are hot on their heels attempting to absorb market share. Each exchange has its own value proposition, it’s own selling point. So what is BTSE’s selling point? Let’s find out.

BTSE was founded back in 2018 with its markets officially launching this year. It is under regulations of the Central Bank of United Arab Emirates. The team hails from a strong combination of traditional financial and software backgrounds. Coming from giants like Goldman Sachs, IBM and Cisco.

Our ethos is to tailor BTSE towards fulfilling the needs of professional traders and institutional investors by providing usability and reliability on a platform with high liquidity and fast settlement, all in a trusted environment.

Futures 2.0

BTSE’s standout feature is what they like to describe as “Futures 2.0”. On traditional crypto derivative exchanges all trading is done through Bitcoin. Whether that be posting margin or settlement (closing positions). Futures 2.0 allows users to post margin and settle their trades in either a selection of cryptocurrencies or traditional FIAT currencies. Users can post margin with multiple currencies and coins simultaneously. With the ability to easily add and remove multiple collateralized assets on the fly.

Spot Markets

Another item unique to BTSE is that they offer traditional spot markets. Users can deposit dollars from their bank account and buy Bitcoin or sell their Bitcoin for dollars. With previous derivatives exchanges this was not possible. It was Bitcoin exclusively. BTSE is also loyal to the cyberpunk philosophy surrounding cryptocurrency even though they offer FIAT deposits and withdrawals KYC is completely optional as long as you stick to cryptocurrency settlement and margin.


Liquidity is what makes or breaks an exchange. A new exchanges primary motive should be generating liquidity. An exchange which can not generate liquidity will not attract users to trade there. BTSE tackles this problem in a number of ways. The most exciting of which being its shared liquidity pool. BTSE’s all-in-one order book allows all users to share the same liquidity pool via ONE order book, regardless of currencies. BTSE has also tried to on board new users with promotions such as fee rebates and deposit bonuses. At the time of writing on a non volatile Sunday market BTSE has reported 37 million dollars in transaction volume on its Bitcoin pairs. Which is very good for a brand new exchange. However, they will need to keep the ball rolling in order to keep up with the competition.

Security and Network

BTSE employs industry standard security techniques such as 2FA and cold wallet storage. From a networking standpoint their exchange is secure as well. BTSE hosts their own servers so there is no reliance on company’s like Google or Amazon to provide hosting. Which has caused problems for exchanges in the past. For example, when Amazon Web Services went down temporarily an exchange called BitMAX had huge problems when a number of their coins lost 99% of their value due to data errors. Many exchanges also have to go through temporary outages in order to update and upgrade their systems. BTSE uses something known as ‘horizontal scaling’ which prevents this.

BTSE has the “typical” 100x leverage. With 5 main trading pairs Bitcoin, Ethereum, Litecoin, Ripple and Tether. All 5 having a futures and USD pairing.


In summary, BTSE Exchange is not revolutionizing cryptocurrency trading. However they are an improvement on whats already there. Whether these improvements can it lead to becoming one of the top exchanges is not for me to decide. But if their dedicated team can keep improving I do not see why not.

Futures Arbitrage, A Trading Strategy for Market UncertaintyFutures Arbitrage, A Trading Strategy for Market Uncertainty

Note: Though we are using Bitcoin for simplicity in this article the same futures arbitrage method can be applied on any asset which has futures contracts available. Such as Altcoins, Gold, Oil, and Currencies among others.

At the time of writing this Bitcoin is at a crossroads for traders. Hovering just above 10000$. It might as well be up to a coin toss whether we continue upwards or head lower. Volatility is nearing lows, and low volatility always precedes high volatility. Essentially, there is a large price move incoming but we do not know which way.

Bitcoin Volatility Index (BVOL)

Now how do we trade such a scenario? Do we take a side and pray that its right? Risking price moving sharply against us. Do we sell all or coins in hopes we buy them back lower. The opportunity cost being that you lose out if price rises sharply. You could do either of these and bet right and make money or you could lose. We need to find a happy medium between these two. One where our risk to the upside or downside is neutral yet we can still profit off volatility. This is where Futures arbitrage steps in.

Before we get into the actual method for futures arbitrage we will first run through some basic terms and what you will need to carry it out. Firstly you will need to sign up for an exchange that has the ability to short Bitcoin and has futures contracts. We recommend either BitMEX or FTX however there is an ample supply of them so use whatever exchange you feel comfortable with.

The Basics of Futures Contracts

Now lets run through the basics of futures. A futures contract is an agreement to buy or sell a particular asset at a predetermined price at a specified time in the future. For example on BitMEX there is a futures contract named XBTZ19. This is a contract to buy Bitcoin on the 27th of December 2019. If you have an exchange in front of you, you will notice that the futures price of Bitcoin is different than the regular price. You would be right to ask why this is? I will bring you back to what a futures contract is. An agreement to buy an asset at some point in the future, not now. So when traders trade futures they are trading based on what they expect the price of their chosen asset to be at some point in the future.

This brings us on to the concept of backwardation and contango. Backwardation is the market condition wherein the price of a commodities forward or futures contract is trading below the expected spot price at contract maturity. Essentially the price of the asset in the future is expected to be less than the price today. Contango is a situation where the futures price of a commodity is higher than the anticipated spot price at maturity of the futures contract. Meaning the price of the asset in the future is expected to be more than the price today. Another essential point to note is that the futures price of an asset will always return to the assets spot price. It is here where our opportunity lies.

Futures Contango and Backwardation Always Return to the Spot Price

Applying The Strategy

Now that we have established the basics of futures contracts how do we exploit them? It is actually very easy. It is best shown by means of example. if today’s price of Bitcoin is 10000$ and the futures price for December is 10300$ we can simply take 50% of our position buy today’s price of Bitcoin and short Decembers price of Bitcoin. (The same method is true for the inverse. If the futures price is less than today’s price. We buy futures contracts and short the spot price.)

The December futures will eventually reach the spot price as previously mentioned. So we make 300$ (10300$ – 10000$ = 300$) completely risk free. Since technically we have zero exposure. 50% buy – 50% sell = 0% exposure. Yet we are guaranteed 300$ as long as we hold to expiry. The same method is true for the inverse. If the futures price is less than today’s price. We buy futures contracts and short the spot price.

But that’s not all. It is possible for the futures contract to flip from contango to backwardation or vice versa. Meaning we can make more than the arbitrage before it even expires. This happened only recently with Bitcoin as well. Notice two red vertical lines on the chart below where it occurred.


In summary. Futures arbitrage is something I believe that every trader should have in his tool belt. It is quite simple and easy to carry out once you first wrap your head around the basics of future contracts. It allows traders to hedge their bets while still having receiving a reward at the end of it. Nobody can say no to essentially risk free returns for doing nothing