Huobi Futures is a part of the derivatives section offered by the Huobi cryptocurrency exchange.
Crypto futures are a type of derivative product that allows 2 users to enter a contract for the purchase and sale of a digital asset at a predetermined date and price. Futures trading gives participants the chance to open long and short positions, increase position size and hedge existing investments.
Unlike traditional spot trading, where investors purchase assets and wait for the asset to appreciate in value, futures offer traders the opportunity to capitalize on both bullish and bearish market movements. Thanks to leverage, futures contracts also provide the opportunity for large gains with a small upfront investment. However, futures also increase risk if the trade doesn't go your way.
Huobi Futures offers traders the option of entering multiple futures contracts across a range of different cryptocurrency assets, including popular coins such as Bitcoin (BTC) and Ethereum (ETH).
Disclaimer: This information should not be interpreted as an endorsement of cryptocurrency or any specific
provider, service or offering. It is not a recommendation to trade.
Huobi offers both coin-margined and USDT-margined futures contracts. While the former is denoted and settled in a designated cryptocurrency, the latter are settled in the Tether stablecoin, USDT.
The Huobi exchange offers a range of popular cryptocurrencies through the Huobi Futures platform, including the following:
Note. Not all coins that are traded on the spot markets can be traded on the futures markets.
Although there is a wide range of cryptocurrency futures contracts, it is recommended to avoid using leverage on futures contracts that have low daily volume or liquidity. Low daily volume or low liquidity usually results in a high likelihood of slippage. Slippage is the change in market price from the time of order entry and order execution. It is a mechanism that can eat into profits.
There are 4 types of futures contracts offered on the Huobi Futures platform: delivery contracts, perpetual swaps, inverse contracts and linear contracts.
Delivery futures contracts
Delivery contracts are futures contracts that are settled at a particular date in the future, known as the delivery date. They are the standard type of futures contract, typically used in the traditional financial markets.
On the delivery date, the buyer of the contract is required to purchase and take on the asset at an agreed price. On the other hand, the seller of the contract is obliged to provide and deliver the asset.
While this method is often used for the physical trade of commodities, most retail and professional traders do not wish to receive or send assets. Delivery contracts are simply a way to profit from market movements. As a result, delivery contracts can be closed at any time before a delivery date.
Huobi Futures offers weekly, bi-weekly, quarterly and bi-quarterly futures contracts that settle every Friday. The value of each contract varies based on the cryptocurrency being traded. For example, each BTC contract is worth $100, but each XRP contract is worth $10.
Only coin-margined delivery futures contracts are available on Huobi. These can be leveraged up to 20x.
Perpetual swaps are an innovative type of futures contract that have no definite settlement time. They are often referred to as perpetual futures on other platforms. These contracts allow traders to "perpetually" hold a position for as long as they want in order to remove time constraints.
In the Huobi Futures platform, there are both coin-margined swaps and USDT-margined swaps. These can be leveraged up to 125x.
A funding mechanism is implemented to anchor the perpetual swap price to the underlying asset price. This is settled 3 times a day or every 8 hours.
Inverse contracts is another name given to coin-margined contracts. They are a type of delivery futures contract and also a perpetual swap. These contracts are denoted by "Coin-M" on the Huobi Futures Exchange.
Although trades are denominated in USD, cryptocurrency assets are used as margin. For example, trading an ETH/USD coin-margined futures contract demands that a trader deposits ETH as collateral.
Linear contracts is another name given to USDT-margined contracts. They are denoted on the Huobi exchange by "USDT-M". The underlying asset for settlement is the stablecoin, Tether (USDT).
More cryptocurrencies can be traded using this contract type due to the stability of the USDT stablecoin. Linear contracts are only offered as perpetual swaps on the Huobi Futures platform, meaning there are no delivery dates. Traders can hold USDT-margined positions for as long as they choose.
While most exchanges offer different tiers of benefits based on asset holdings, Huobi is unique in that it sets trading levels similar to a video game. Traders are rewarded "Huobi EXP" for using the platform.
To gain Huobi EXP and advance to a higher Huobi VIP level, a trader must meet the required daily volume limit, which can range from $3,500 to $5,000, depending on the market being traded. Trading volume is based on its converted USD value.
Ranging from Advanced level to Partner level, awards are given with each VIP tier. These benefits can include increased loan limits, access to market research, VIP ID Cards and VIP Life Challenge Event Games – the latter act as an invitation to real-life events, such as alpine skiing races and windsurfing competitions.
Huobi offers leverage on all futures contracts. This ranges from 1x, 2x and 3x up to 100x for specific cryptocurrency assets. This enables traders to significantly amplify returns. However, it also amplifies losses if a trade goes the wrong way.
When trading with leverage, a trader must deposit a maintenance margin to open a new position. This maintenance margin is calculated based on the entry price and amount of leverage chosen. The remainder is then borrowed from Huobi. If the market price hits the maintenance price, the position gets liquidated.
Creating a Huobi Global account is simple and easy. New users must register using an email address and phone number to begin trading.
Step 1. Navigate to the Huobi Global website and select "Sign up".
Step 2. Select your country and provide your email and phone number.
Select the country you currently reside in and provide your email address along with a secure, private password. It's important to note that certain services are not provided to every country. Once your email and phone number are submitted, they cannot be used for a different account.
Step 3. Enter the registration code to complete the account verification process.
You will receive an email with your verification code. Once submitted, your account will be created. Your Huobi Global account is used for both spot trading and futures trading.
Step 1. Navigate to the Futures Trading platform
While on the main Huobi Exchange homepage, select "Derivatives". Accept any prompts that may follow.
Step 2. Provide additional verification to enable futures trading
Once you have arrived at the Huobi Futures Exchange, you will see the following prompt.
Select "Open Futures Account".
On the next page, you will be required to submit identity verification documents. This will include providing photo ID and a photo of yourself holding your ID in front of a piece of blank paper. This will complete the risk verification process.
Step 3. Fund your Futures Wallet
The next step is to fund your futures account. While on the Huobi Futures homepage, hover over "Trading Management" and select "Derivatives Assets".
Once you are inside your Futures Wallet, select "Transfer" to begin moving assets to your Futures wallet. Input the amount you wish to transfer and click accept. If you don't currently hold cryptocurrency assets on the Huobi exchange, you will either need to buy some through the exchange or transfer assets from your personal cryptocurrency wallet.
Step 4. Begin trading Huobi Futures
From the homepage, hover over "Derivatives" to reveal 3 futures products. Select the form of contract you wish to trade. You will then be taken to the live updates platform.
Customisable options, such as the length of perpetual contracts, deciding on whether to enter a long or short position and deciding between a limit order and a trigger order are all available from the live updates platform. Traders can also select how much leverage they would like to use.
Remember – positions are liquidated when a trade's value drops below the maintenance percentage. This maintenance level is determined once your average entry point and degree of leverage have been chosen.
If the market price crosses the computed threshold line, the futures position will be liquidated and the collateral used for the trade will be lost.
When a transaction is executed on the Huobi platform, a fee will be included in the realized loss or gain of the trade. The formula for calculating the expected trading fee is as follows:
Trading fee = (contract volume * face value of contract/average transaction price) * rate
The rate refers to the commission for a "maker" or "taker" of a transaction.
Traders that place an order that is not filled immediately are considered makers because they "make" an opportunity for someone to create a contract – they create liquidity in the market. On the other hand, takers have orders filled instantly, so they "take" liquidity from the market. Makers pay slightly smaller fees as this incentivises traders to place orders on the book.
Note. An additional fee is charged for deliveries. If a delivery contract is not closed before the delivery time, the system will make the delivery according to your position.
Delivery fees are calculated at a flat rate. This is 0.015% for BTC, and 0.05% on all other contracts.
Cryptocurrencies, especially coins with lower market caps, are highly volatile. Some coins experience wild swings in price based on news events. This can be a significant risk when trading futures contracts with leverage.
Leverage can be a great tool when a trader is confident in future price action, but the future price of any asset is never guaranteed. Unlike spot trading, where a trader is not required to realize gains or losses, futures have a liquidity threshold that, once met, will result in the liquidation of a position.
System disruptions are a risk for any trading platform. Millions of dollars in cryptocurrencies are being traded daily across the globe. Sometimes these systems can go wrong.
System failures may cause unexpected losses because a trader may be unable to observe price action and make necessary adjustments to prevent liquidation.
Popular exchanges like Huobi Global all have crucial safety features including SMS/email notifications, cold wallet storage and 2FA. However, while cybercrime prevention is high, it does not always prevent platforms from being breached by hackers. If hackers breach the security of a platform, all assets held are at risk.
While Huobi does not insure your assets if they are stolen, the exchange has taken several initiatives to put investors at ease when trusting them with their coins and fiat. In 2018, Huobi Global launched its Protectors Investor Fund, which dedicates 20% of its revenue to buy Huobi tokens (HT). The Huobi tokens are then stored in the Investor Protection Fund and used to compensate users when sudden risks occur.
Huobi Global has also created the Security Reserve Mechanism, which is a reserve of 2,000 BTC that is stored at an independent address in case an accident occurs.
- Low minimum deposits to begin trading
- Large selection of educational resources
- Large range of coins available for swapping
- Not regulated by a government body
- Lower levels of leverage available than other competitors
- Customers that reside in the US or Canada are unable to use the platform
Huobi Global is an ambitious player among the many exchanges that offer crypto futures trading. The exchange is attempting to expand globally and now offers accounts in over 130 countries. The platform's fixed maker and taker fees are competitive and the innovative security measures should help to preserve customer confidence.Huobi Futures offers a good selection of futures contracts across a wide range of cryptocurrencies. The live update platform also offers a clean interface with all of the features required for both new and experienced traders.
The inability to offer services to both US and Chinese residents may make it difficult to snatch market share from competitors, but with an established, battle-tested footprint, Huobi is likely to be a solid option for futures traders for years to come.
Disclaimer: Cryptocurrencies are speculative, complex and involve significant risks – they are highly
volatile and sensitive to secondary activity. Performance is unpredictable and past performance is no guarantee of
future performance. Consider your own circumstances, and obtain your own advice, before relying on this information.
You should also verify the nature of any product or service (including its legal status and relevant regulatory
requirements) and consult the relevant Regulators' websites before making any decision. Finder, or the author, may
have holdings in the cryptocurrencies discussed.