What is futures?

A contract to buy or sell an asset at a set price on a future date.

Crypto futures are usually cash-settled and often traded with leverage, so a small move against the position can wipe out the deposit; see liquidation. Availability to retail traders is restricted in a number of jurisdictions.

The distinction that matters most to a buyer is that a futures position is not the asset. You cannot withdraw it, send it, or hold it indefinitely without cost, and if the position is liquidated you own nothing at all. Buying on the spot market and buying a future are different activities that happen to track the same price.

How it works

A dated future settles on a fixed date. A perpetuals contract has no expiry and uses a funding rate instead to keep it near spot. Both are traded on margin, which is where the risk comes from.

You post initial margin to open a position and must keep maintenance margin to hold it. Profit and loss are calculated against the position's full notional size, not against what you deposited. Leverage of ten times means a 10% adverse move erases your deposit, and the venue closes the position before it goes negative; see liquidation and negative balance protection.

Settlement in crypto is usually in cash rather than delivery of the asset, so the contract resolves to a payment based on an index price rather than to coins arriving in your account.

Regulation is the other half of the picture. The United Kingdom's Financial Conduct Authority prohibited the sale of cryptoasset derivatives and exchange-traded notes to retail consumers from 6 January 2021 (source: Financial Conduct Authority Policy Statement PS20/10). Other jurisdictions restrict leverage limits, require specific licensing, or bar retail access outright, and offshore venues offering high leverage are often unavailable or unlawful to use from regulated markets.

Example

Illustrative arithmetic. You post $1,000 of margin at ten times leverage, giving a $10,000 position. A 5% favorable move is $500, a 50% return on your deposit. A 5% adverse move is a $500 loss, half your deposit gone. A 10% adverse move takes the whole $1,000 and the position is liquidated before it reaches that point, because the venue closes it once maintenance margin is breached. The same 10% move on a $1,000 spot purchase costs $100 and you still hold the asset.

Why it matters when you buy

If your goal is to own an asset, futures are the wrong instrument: they carry funding or expiry, they can be liquidated, and they deliver no coins. They are also unavailable to retail traders in several major markets. Check what is permitted where you live at the jurisdiction pages and compare spot venues at the fee comparison.

Related terms

perpetuals — the no-expiry variant, leverage — what magnifies the outcome, liquidation — the forced close, initial margin — what opens a position, funding rate — the carrying cost on perpetuals, spot market — buying the asset instead.

Questions

Do I own the asset if I buy a futures contract?

No. You hold a contract whose value tracks the price. Crypto futures are usually cash-settled, so nothing is ever delivered and nothing can be withdrawn to a wallet.

Why can I not trade crypto futures where I live?

Several regulators restrict or prohibit retail access. The United Kingdom banned the sale of cryptoasset derivatives to retail consumers from January 2021, and other jurisdictions impose leverage caps or licensing requirements.

Is a perpetual a future?

It is a futures-style derivative without an expiry date, kept near spot by periodic funding payments rather than by approaching delivery. The margin and liquidation mechanics are the same.