Futures Contract

A futures contract is an agreement to buy or sell an asset at a predetermined price on a specific future date. In crypto, futures let traders speculate on price direction with leverage, hedge existing holdings, or gain exposure without holding coins directly.

For example, a quarterly BTC futures contract expiring in March obligates settlement at expiry: a trader who bought the contract at $60,000 profits if BTC settles higher and loses if it settles lower. Many crypto futures are cash-settled — the difference is paid in dollars or stablecoins rather than delivering actual bitcoin — though some venues offer physically delivered contracts.

Dated futures often trade at a premium to spot in bullish conditions (contango); the gap, called the basis, shrinks toward zero as expiry approaches. This enables the cash-and-carry trade: buy spot, short the future, and earn the basis with limited price risk. Regulated venues such as the CME list crypto futures used heavily by institutions. A common misconception is that futures and perpetual futures are the same; perpetuals never expire and use funding payments instead of a settlement date, while traditional futures converge to spot at a fixed expiry.