- Binance has launched quarterly futures contracts.
- This marks its latest expansion into the derivatives market.
- Binance has quickly gained market share.
Crypto exchange Binance today launched quarterly Bitcoin futures. The addition marks Binance’s latest expansion into the crypto-derivatives market, an area in which the firm is quickly gaining market share.
Futures trading allows traders to bet on the expected price of Bitcoin at a moment in the future. Traders can go "long," expecting the price to go up, or "short," for it to go down.
Binance has offered futures contracts since 2019, but these were perpetual contracts that can end at any point. By comparison, quarterly futures end on the last Friday of the corresponding three-month period.
Just like the perpetual contracts, the quarterly Bitcoin futures contracts offer leverage of up to 125x. This allows traders to amplify their trades—increasing their potential winnings and losses.
Binance gets into derivatives
“We are a late-comer to derivatives,” Binance CEO Changpeng Zhao told Decrypt. But the giant crypto exchange has quickly muscled its way to the front. A report by CryptoCompare last week showed that derivatives volumes on Binance are the third-largest in the industry, behind Huobi and OKEx. In the last 24 hours, $2.42 billion was traded on its futures exchange, also ranking third in the market, according to data from Skew Analytics.
In May, Binance’s derivatives share increased by 58% compared to the previous month, according to CryptoCompare, and Binance reports a 217% increase in institutional client volumes compared to the previous quarter.
Zhao said that Binance offers institutional investors its big name brand, security and lower fees. “Binance is one of the strongest brands in the industry already, and also has the highest number of VIP and institutional investors in the market,” he said, adding, “We invested heavily in security to prevent risks of hacking and also have a SAFU fund to ensure funds are safe in Binance.” SAFU is one of Zhao’s favorite phrases. It means that funds are insured in case of a hack.
Zhao also touted Binance’s stability, both “in terms of both system stability and available liquidity.” In "high volatility days where other platforms suffered from system stability and/or liquidity crunches, Binance performed with little issues," he said.
In February, Binance's spot exchange struggled with performance issues when Bitcoin's price rose, even though the exchange was "stress-tested...like crazy in our test environments,” Zhao said at the time. Binance suffered no such problems later in the year, even though peak trading volumes have surpassed levels observed at the time of the performance troubles.
Binance warns that, due to the fluctuations of the Bitcoin market, "there is a chance that all margin balance in your futures wallet may be liquidated."