The Universe of Crypto Futures Products

By Austerity Sucks - January 31, 2020

I will focus on the BTC/USD pair, meaning BTC is the base currency and USD is the quote currency. There are multiple dimensions to crypto futures:

1. Perpetual (no expiry) vs. Fixed Maturity (expiry) Contracts
2. Cash-settled vs. Deliverable
3. Inverse vs. Linear
4. Single-collateral vs. multi-collateral
5. Single-currency settlement vs. multi-currency settlement

Perpetual means that the contract never expires and has no settlement — or put differently, it has settlement multiple times a day. Instead of the premium being baked into the price, there is a periodic funding rate that is used to penalise long or short holders based on whether the contract is trading at a premium or discount. Perpetual contracts are currently the most popular out there as they offer the ability to have long holding periods and open up the opportunity for interest rate arbitrage plays. Fixed maturity contracts have the benefit of you paying a fixed premium or discount once you are entering position, and not having the uncertainty of a fluctuating funding rate which could penalise you depending what side you’re on.

Cash-settled means that when trading contracts your profits are settled in a currency, usually available to withdraw immediately.
Examples: BitMEX, CME, FTX, BTSE, OKex, Deribit, BinanceFutures

Deliverable means that the trades are settled by the long side delivering USD or USD-stablecoin and the short side delivering BTC. This requires that traders wait until futures contract expiration to withdraw any profits.
Examples: CoinFLEX, Bakkt

Inverse means that profits settle in the collateral currency, usually BTC, in an inverse function such that the profits are represented in USD. The contract values are in USD but you use BTC as collateral and have profits settled in BTC. This allows you to use BTC to make perfect USD hedges. Note that inversion formula ((1/Entry) - (1/Exit)) * USDContracts means that a short position earns you more in BTC than a long position, as it is matching USD value in the collateral so as price goes up you earn less BTC since BTC is worth more. Because the contract face value is in USD/USD-stablecoin it has the same structure as a linear BTC/USD contract.
Examples: BitMEX, Deribit, Huobi, OKex

Linear is the more standard contract in traditional markets where the payout occurs in the quote currency, so (Entry - Exit) * Contracts, where the contracts are in the base currency, Bitcoin. The settlement is not necessarily in the quote currency, USD, it could be converted as well.
Examples: CME, FTX, BTSE, BinanceFutures, CoinFLEX, BitfinexFutures

Single-collateral is where you can trade a futures contract using only one valid collateral asset. Meaning if you want to trade inverse BTC/USD futures you can only use BTC as collateral, and certain linear BTC/USD futures you can only use USD as collateral.
Examples: BitMEX, Deribit, OKex

Multi-collateral is where you can trade futures using multiple forms of collateral. So if you want to trade BTC/USD futures you can use ETH, BTC, USD, and other assets as collateral to back a position in the contract, regardless of what the settlement currency is.
Examples: CME, BTSE, FTX

Single-currency settlement is where profits are paid out on trades in only one currency: usually either BTC or USD. There is no choice or flexibility to settle profits in other assets.
Examples: BitMEX, Deribit, CME, OKex, Huobi, BinanceFutures

Multi-currency settlement is where profits can be paid out in more than just one currency. There is flexibility to be paid out in either bitcoin or USD.
Example: BTSE

If a contract has a date attached to it, then it has a fixed premium/discount upon position entry and an expiry date where all open interest is settled. If a contract doesn’t have a date attached to it then it is a perpetual contract that uses a funding rate, usually every 8 hours, to anchor the market price to the spot value. Thus, points 2–5 are the most critical dimensions in terms of financial engineering, so I will divide the different products into categories comprised of unique combinations of these features:

• Type A: Cash-settled, inverse, single-collateral, and single-currency settlement.
• Type B: Cash-settled, linear, single-collateral, and single-currency settlement
• Type C: Cash-settled, linear, multi-collateral, and single-currency settlement
• Type D: Cash-settled, linear, multi-collateral, and multi-currency settlement
• Type E: Deliverable, linear, multi-collateral, and single-currency settlement

Most exchanges are in the category A, led by BitMEX.
The second most popular is category B, led by Binance.
The third most popular is category C, led by CME.
Fourth most popular is category D with only BTSE offering it.
And finally there is the category E led by CoinFLEX

Below is a comprehensive table of all active bitcoin futures exchanges and the product types they offer: