Cryptocurrency trading has only been around for about ten years, so the market is still in its early stages compared to traditional markets, especially in terms of trading products. Traditional markets offer numerous trading opportunities, such as options, exchange traded funds (ETFs), bonds and many others.
Opportunities for crypto traders have been limited in comparison, although the market is starting to produce more variety. Index futures trading is one area in which the crypto market is seeing growth.
What Is an Index?
On its most basic level, an index is a way to see the health of a broad market or sector, in terms of a single price. Common examples in traditional markets include the Dow Jones Industrial Average and the NASDAQ Composite.
An index takes several assets and compile them into one price to show overall price strength of a certain sector or basket of assets. Some assets behind this single price can be given different weighting as part of the price average, affecting the single index price based on those assets’ impact on the overall market. This weighting sometimes can help indices provide a more accurate gauge of market or sector health.
Depending on the exchanges offering such products in the crypto space, traders can trade futures products based around various indices. BTSE is one crypto exchange that has developed crypto index futures trading, in collaboration with Brave New Coin.
BNC Crypto Index Futures On BTSE
BTSE has partnered with crypto data and research company Brave New Coin (BNC). BNC created two indices, BBCX and BBAX, around which BTSE has developed two separate futures trading products.
The partnership allows for a level of objectivity. BNC is in charge of running and developing the numbers and calculations for the indices, called the BTSE-BNC Basket index family, while BTSE oversees the actual order book and product trading based on those indices on the BTSE exchange.
BBCX and BBAX
BTSE will host futures trading for BBCX composite and BBAX composite indices.
The main coin index, BBCX, consists of Bitcoin (BTC), Litecoin (LTC), and Ethereum (ETH). The altcoin index, BBAX, consists of ETH, LTC, EOS (EOS) and Ripple’s XRP.
These indices are objective, unbiased, transparent indices that represent overall crypto market movements for main coins and altcoins.
BTSE’s BBCX and BBAX index futures trading comes with monthly and quarterly expirations. It is important to note that all BTSE futures trading products are cash-settled. This means that if you hold a position until expiration, you will receive the amount of the product you hold at expiration in cash once settlement occurs.
BTSE has launched futures trading for the main coin index (BBCX) first, with BBAX futures trading expected to hit the BTSE exchange before the end of 2019.