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Inverse Futures Contract Meaning

A type of derivative where the underlying "collateral" is the digital asset itself, rather than a stablecoin like USD. For example, in a Bitcoin inverse future, you use BTC as your margin and you are paid out in BTC if you win.

The value of the contract is calculated in USD, but the settlement is always in the asset. These are highly popular among "HODLers" who want to trade without ever leaving the crypto ecosystem.

However, they carry a unique "double-risk." If you go "long" on Bitcoin and the price drops, you not only lose the trade, but the "value" of the collateral you have left is also worth less in USD terms. This can lead to liquidations much faster than in a USD-margined contract.

Conversely, inverse futures are an excellent tool for "hedging." If a miner knows they will have 1 BTC next month, they can take a "short" inverse position to lock in the current USD value. If the price of BTC drops, their short wins more BTC, meaning they end up with the same total USD value regardless of where the market goes.

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Finery Markets BVI Limited (“Finery Markets”) provides software, technology infrastructure, and related Information and Communication Technology (ICT) services on a Software-as-a-Service (“SaaS”) basis. Finery Markets acts solely as a software vendor and does not operate a trading platform, does not intermediate, match, execute, clear, or settle transactions, and does not engage in any activities that would require regulatory authorisation under applicable laws.

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