Many Bitcoin futures contracts have an expiration date. These contracts are basically used to buy or sell Bitcoin in the future at a fixed price in the present and therefore have a specific expiration date on which settlement occurs.
However, there are also so-called perpetual contracts, that is, futures contracts with no expiration date. This type of contract does not require the trade order to be executed on a specific date.
In both cases, however, they are derivative financial products that replicate the price of the underlying asset. Futures like bitcoin have BTC as an underlying, so their price replicates that of BTC.
Perpetual contracts are often used for trading and speculation, especially by those who do not want to directly trade the asset but prefer to trade derivatives. Traditional futures contracts, on the other hand, are also used to hedge against risk, as they allow the future buy and sell price to be set in the present.
In addition, there are bitcoin futures that are settled in BTC at expiration and others that are settled in dollars.
How does the expiration date of Bitcoin futures work?
The expiration date of traditional futures contracts depends on the issuer. That is, the issuer of these contracts actually also decides their expiration date.
In traditional financial markets, there are two main issuers of bitcoin futures contracts in particular: CME Group and Bakkt.
Those with the largest market, that is, the largest trading volumes, are undoubtedly those of the CME Group, listed on the world's largest derivatives exchange, the Chicago Mercantile Exchange (CME).
The fact is that they are not only traded on the world's leading derivatives exchange, but they are also settled directly in dollars. That is, at maturity, the payment from the buyer to the seller is made in USD.
These are probably the bitcoin futures contracts that have the biggest impact on the BTC market.
They expire monthly, the last Friday of the month. Settlement takes place on the Monday following expiration.
Since its launch in December 2017, the price of bitcoin has often dropped significantly a few days before its expiration. It is possible that there is some correlation between the two events, although this has not yet been proven with certainty.
Bakkt futuresOn the other hand, they are traded on Wall Street, the New York Stock Exchange (NYSE) and settled in BTC. This may be one of the reasons they have been less successful so far, although a second dollar-settled version has also been created.
These contracts expire on third Thursday of the month and the settlement takes place the next day.