What is Bitcoin Contract? How to profit from Bitcoin Contract?

🎉 Introduction

This article explains what Bitcoin Contract trading is and how to profit from Bitcoin Contract, providing a comprehensive guide for digital asset investment beginners. Gate.io Bitcoin Contract allows users to predict price movements and profit by going long or short without actually holding Bitcoin, and provides a variety of order types and smart tools such as trading robots, one-click copy trading, etc.

👁 Learn about Bitcoin Contract

Gate.io Bitcoin Contract provides traders with a powerful way to participate in Bitcoin price movements without owning the underlying asset. Gate.io Bitcoin futures allow users to use leverage to speculate on the future price movement of Bitcoin. Leverage allows traders to amplify their gains, but also comes with higher risk.

Gate.io offers two main types of Bitcoin futures: perpetual futures and futures futures[1].

Perpetual futures are the most popular type of futures on Gate.io. Unlike traditional futures, perpetual futures have no expiration date, allowing traders to hold positions indefinitely. This makes them ideal for both short-term and long-term trading strategies. Gate.io offers USDT-margined and BTC-margined perpetual futures for Bitcoin[1]. A key feature of Gate.io Bitcoin futures is the use of mark prices for liquidation. The mark price is based on the external market price plus the funding rate, which helps prevent unnecessary liquidations due to temporary price spikes. This provides traders with greater stability in their positions than using only the last traded price[1].

Gate.io has also implemented an insurance fund and automatic deleveraging (ADL) to manage liquidations during market volatility. The insurance fund helps absorb losses from liquidated positions that cannot be filled at the bankruptcy price. If the insurance fund is exhausted, the ADL will reduce the positions of profitable traders to make up for losses [1].

💰 How to make a profit through Bitcoin contracts?

Bitcoin contract trading uses two strategies to make profits: long and short. The core of the strategy is to predict the future trend of Bitcoin prices.

Long (Long):
Expectation: Believe that the price of Bitcoin will rise.
Operation: Buy Bitcoin contracts.
Profit: When the price of Bitcoin rises, the value of the contract will also rise, and you can make a profit when you close the position. Profit = Closing price - Opening price (multiplied by the number of contracts and leverage multiple)
Risk: If the price of Bitcoin falls, you will face losses or even liquidation.

Short (Short):
Expectation: Believe that the price of Bitcoin will fall.
Operation: Sell Bitcoin contracts (borrow Bitcoin to sell).
Profit: When the price of Bitcoin falls, the value of the contract will also fall. When you close the position, you can buy back the Bitcoin at a lower price and return it, thereby making a profit. Profit = Opening price - Closing price (multiplied by the number of contracts and leverage multiple)
Risk: If the price of Bitcoin rises, you will face losses or even liquidation. Shorting requires paying a Funding Rate. If the price continues to rise, the accumulation of Funding Rates may lead to huge losses.

This can be better understood through examples:

Suppose you use 10x leverage to trade a Bitcoin contract with a contract value of 1 Bitcoin.
-Long: You buy a contract at $10,000. If the price of Bitcoin rises to $11,000, you close the position and make a profit of (11,000 - 10,000) * 10 = $10,000.

-Short: You sell a contract at $10,000. If the price of Bitcoin falls to $9,000, you close the position and make a profit of (10,000 - 9,000) * 10 = $10,000.

It should be noted that the above example ignores transaction fees and funding rates. Actual profits will be affected by these factors. In addition, leveraged trading is extremely risky, and even small price fluctuations can lead to huge losses or even liquidation.

Going long or going short are two basic strategies for trading Bitcoin futures. The strategy you choose depends on your judgment of the future price trend of Bitcoin. No matter which strategy you choose, you must carefully manage risks, set stop losses, avoid excessive leverage, and pay close attention to market dynamics. Remember, in high-leverage trading, the possibility of losses is as high as the possibility of profits, or even higher.

🚀 Bitcoin contracts on Gate.io

Trading Bitcoin futures on Gate.io is simple. First, users need to transfer funds to their contract account and choose between live trading and simulated trading mode. Simulation mode allows risk-free practice with simulated funds [1].

When opening a position, traders must select the desired leverage. By setting leverage, profits can be magnified, but losses can also be magnified. Gate.io offers up to 100x leverage for some Bitcoin contracts. For information on initial and maintenance margin requirements for opening a position, please refer to this help document: https://www.gate.io/help/futures/futures/22148

To manage risk, Gate.io has implemented a tiered risk limit , which is divided into two modes: full margin and isolated margin. Full margin uses the entire account balance as collateral, while isolated margin allows a fixed collateral amount to be set for each position [1]. To manage risk, Gate.io has implemented a tiered risk limit . As the size of the position increases, the maintenance margin requirement also increases. This helps prevent over-leveraging of large positions, which can affect market stability [1].

Trade Bitcoin futures now: https://www.gate.io/futures/USDT/BTC_USDT

🔍 Comparison of BTC and USDT futures on Gate.io

Gate.io offers Bitcoin futures contracts with BTC margin and USDT margin. Each contract has unique features and is suitable for different trading strategies:

BTC-margined futures are ideal for traders who want to accumulate more Bitcoin, as both profits and losses are settled in BTC. These futures also have lower funding rates, which can reduce the holding costs of long-term positions [2].

USDT-margined futures offer more stable collateral values, and it is easier to calculate profits/losses in fiat currency. Traders who focus on USD-denominated returns generally prefer these futures. However, during strong bull markets, funding rates for USDT futures may be higher [2].

Both contract types on Gate.io offer high liquidity and low spreads for efficient trading. The choice between BTC and USDT futures ultimately depends on the trader’s risk management preferences and overall strategy.

💡Advanced Strategies for Futures Trading

Experienced traders can employ several advanced strategies for futures trading:

Hedging: Long-term Bitcoin holders can use futures short positions to protect against potential price declines without having to sell their spot holdings. This strategy helps manage portfolio risk during periods of market uncertainty [3].

Arbitrage: Traders can take advantage of price differences between the Gate.io spot and futures markets or between different contract types. These opportunities are often short-lived, but can result in sustained profits if uted properly [3].

Scalping: The high liquidity and low fees of Gate.io Bitcoin futures make scalping strategies highly profitable. Traders can use high leverage to profit from small price movements, but strict risk management is essential [3].

Grid Trading: Gate.io’s advanced order types enable the implementation of grid trading strategies. This involves placing multiple buy and sell orders at different price levels to profit from range-bound markets [4].

Funding rate arbitrage: By taking opposing positions in perpetual and quarterly contracts, traders can capture funding rate differentials while remaining market neutral. This strategy requires careful timing and position sizing [3].

To effectively ute these strategies, traders should leverage Gate.io’s multiple order types, including limit, market, stop-loss, and take-profit orders. The platform also provides a robust API for algorithmic trading and custom bot development [4].

📖 Conclusion

Gate.io’s Bitcoin futures offer a diverse trading experience that caters to a variety of strategies and risk appetites. From perpetual futures to advanced hedging techniques, traders can leverage these tools to navigate the volatility of the cryptocurrency market. By understanding the nuances of BTC and USDT margin contracts, leveraging risk management features, and exploring sophisticated trading methods, investors can potentially improve their trading results on the platform.

Risk Warning: Cryptocurrency trading involves significant risks. Market volatility and regulatory changes can significantly impact trading results. Always trade responsibly.

📚 References

[3] Detailed explanation of perpetual contract trading rules on gate.io trading platform (picture and text)
[4] Are you ready to take your cryptocurrency trading experience to the next level …