3 Reasons to Trade Nano Bitcoin Futures
There are a lot of financial products out there, and futures in particular come with many different (and often confusing) specifications. The latest addition to this world of futures products is Coinbase’s Nano Bitcoin futures contract.
But don’t worry if you don’t quite understand what nano futures are, because we will explain all the basics in this article, as well as giving you 3 main reasons to consider trading this latest bitcoin futures contract.
What is a Nano Futures Contract?
A futures contract is an agreement to buy or sell an asset at a predetermined price at a specific date in the future. In this case, the asset in question is Bitcoin. If you want to learn more about crypto futures in general, check our article What are Cryptocurrency Futures?
Each contract has its own specifications, such as minimum contract and tick size. They also have their own codes. For the Coinbase Nano Bitcoin Futures, the code is BIT. You will also need to include the expiry which rolls over every month. For instance, at the time for writing, the complete code will be BITQ2, the ‘Q’ representing the month of August, and the ‘2’ representing the year 2022. You can use Bookmap’s Symbol Table to aid you with this.
The unique thing about nano contracts is that they are sized at 1/100th of a Bitcoin. This comes with an array of benefits.
Top 3 Reasons to Trade Nano Futures
Being priced at 1/100th the size of Bitcoin means they are cheaper to trade. In other words, you can trade more of the cryptocurrency with less margin.
This comes with a multitude of other benefits, including the freeing up of capital for other opportunities. But there are cons that need to be noted too, and you can read about the nuances of futures margin in our article Futures Margin: Making Leverage Work for You.
The other huge advantage with these smaller-sized contracts is the extra flexibility for position sizing. If you are trading full contract sizes, it can result in your position being too risky when trying to trade bigger positions, even if the next increment down is too small. It is common practice for professional traders to risk only 2% of their account equity per trade, and having too large fluctuations in your position sizing relative to your stop losses can seriously mess up your trading results.
Hedging (with Shorting)
The crypto market’s recent long-term price correction has been tough for investors and traders alike. With a drop of nearly -75% peak to trough in the BTCUSD rate since late last year, there has been a lot of pain experienced in the market.
But for some traders, it may have been a blessing. For those who went short during this downtrend, even the most poorly timed trades were easy to manage, moving quickly into profit.
For those traders who are less speculative in nature, trading a product such as a nano futures contract would allow them the opportunity to hedge their downside when they saw risks brewing. This could even be fine-tuned based on their capital and level of conviction, for instance hedging only a portion of their Bitcoin holdings to still maintain some upside potential, but minimize the potential of losses on the downside.
Zero Trading Costs
Perhaps best of all, trading Nano Bitcoin Futures comes with zero trading costs: no commissions, no market data fees, no subscriptions fees, and no inactivity fees.
Some markets such as traditional futures or the stock market come with a host of necessary associated costs to be able to trade properly. For instance, if you want to trade more than 4 times a week on the US stock market, your broker will require you to have at least $25,000 to cover the margin in your account. But with Nano Bitcoin Futures, you can trade with as little as $25 (that is 1/10,000th less)!
Trading in and out of positions without worrying about commissions just gives you an extra piece of mind, allowing you to test trading ideas without the need to worry about the cost.
There are many things to consider when it comes to choosing a futures contract to trade, and that’s after choosing which asset to focus on! Make things easier for yourself by first of all making sure that the contract fits your account size and risk tolerance, which nano futures do by definition, also allowing for greater flexibility in position sizing trades. This benefit also means you are able to precisely hedge or take a speculative position with shorting.
The fact that there are zero trading costs is just the icing on the cake, something which greatly increases your chances of trading profitably.
If you want to explore how to trade Nano Bitcoin Futures, consider Bookmap’s Multibook, which not only allows you to look at the price and traded volume on Coinbase, but also cross-reference this price and transactional volume to another 4 of the biggest exchanges on the crypto market. Combined with Cross Trading, you could see under the hood of this cross-exchange liquidity while sending your orders directly to Coinbase. Click here to get started for free today.