Stocks

Why Trade Micro Bitcoin Futures (MBT) vs the Spot Market?

Micro Bitcoin futures (MBT) offer significant advantages in trading Bitcoin compared to the “spot” market for Bitcoin. These advantages include a centralized and regulated marketplace and the ability to be either long or short, distinctions which are not available when trading in the underlying or spot market for Bitcoin.

Key Advantages of CME Micro Bitcoin Futures

Launching on May 3, 2021 by the CME Group, Micro Bitcoin futures (MBT) offer trading participants the opportunity to trade Bitcoin with a smaller capital requirement required for a contract that is 1/10th of one Bitcoin & 1/50th the size of the larger Bitcoin futures contract (BTC). Providing a marketplace to participate in Bitcoin price action without owning the underlying currency, MBT futures can offer distinct advantages to traders.

  • Easy Access: Trade Micro Bitcoin futures (MBT) in your NinjaTrader futures account along with all the other futures products offered. There is no need to open another account or navigate the various unregulated markets that offer spot Bitcoin.
  • Reduced Financial Commitment: MBT futures are 1/10th of one Bitcoin and therefore allow the flexibility to access the market with a smaller capital commitment. Additionally, the smaller size of MBT futures offers the potential to trade spreads against other CME micro products including Micro FX and Micro Gold. Because all these products clear at the CME Clearinghouse, there may be some opportunities for margin offsets.
  • Trade Long or Short: MBT futures, like all other futures contracts can be traded from both the long and short side without restrictions. This is very convenient for traders compared to the spot Bitcoin market which can only be traded from the long side, meaning traders can only attempt to profit from a rise in Bitcoin prices.
  • Liquidity: CME’s liquidity pool is vast and global, and in addition to active participants from around the world, there are many liquidity providers that add to the order book.
  • Near 24 Hour Trading: MBT futures are available for trading from 5:00pm CT to 4:00pm CT Sunday through Friday. Therefore, you can access and trade MBT futures during US, Asian and European trading hours.
  • CME Globex: Trading occurs on CME’s Globex central limit order book (”CLOB”). All market participants see the same price, the same bid and the same offer at the same time in one global order book. All traders have the same opportunity. CME Globex is a time-proven and extremely durable electronic platform with multiple back-ups and redundancies in place.
  • Central Clearinghouse: CME’s centralized clearinghouse and daily margin settlements with all clearing firms brings a significant level of confidence to market participants especially compared to uncleared markets.
  • Regulated Marketplace: CME Group products and the CME Clearinghouse are under the regulation of the Commodity Futures Trading Commission (CFTC). Futures Commission Merchants (FCMs or brokers) are also registered with the National Futures Association (NFA) which is the self-regulatory organization of the CFTC. This regulatory oversight is a significant advantage for traders compared to the unregulated spot marketplace for Bitcoin.

Challenges of Spot Bitcoin

In contrast, traders looking to start trading actual Bitcoin, or “Bitcoin spot,” face some unique challenges.

  • Start Up: Since the spot market is decentralized, traders will need to spend time reviewing and learning about the various different platforms available in addition to setting up their digital wallet. This process can be time-consuming.
  • Safety and Account Security Concerns: Spot Bitcoin is traded on web-based cryptocurrency exchanges which are not regulated. Their systems are not as secure or stable as the CME Group Globex system, the CME Clearinghouse or the FCMs which are all regulated by the CFTC and NFA. When trading MBT futures your positions are at the CME Clearinghouse which settles daily with all clearing firms and your money is in a segregated custodial bank account.
  • Tax Challenges: Due to the nature of cryptocurrency and how it is treated for tax purposes, complications can arise when processing taxes on crypto gains & losses.

Start Trading Micro Bitcoin with NinjaTrader

Open your NinjaTrader futures account with a minimum of $400 and prepare to trade Micro Bitcoin Futures starting on May 3!

NinjaTrader supports more than 100,000 traders worldwide with a powerful and user-friendly trading platform, deep discount commissions and world-class support. NinjaTrader is always free to use for advanced charting, strategy backtesting and an immersive sim trading experience.

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