28.11.2021

How is Binance Futures different from other crypto exchanges?

In 2021, the entire crypto futures industry is more competitive than ever as crypto exchanges strive to offer the latest products and functionalities to attract users.

There are many platforms to choose from today, but not all exchanges are created equal.

Functionality of cryptocurrency exchanges. Most native cryptocurrency exchanges offer one of the following three products:

  1. Cryptocurrency and fiat trading.
  2. Cryptocurrency trading.
  3. Crypto derivatives trading.

These cryptocurrency exchanges either specialize in fiat and spot cryptocurrency products or crypto derivatives such as futures.

Thus, users on these exchanges can only trade on a spot or derivative trading platform. This means that users’ options for using crypto assets are limited, which makes it more difficult to hedge positions or engage in arbitrage.

If users want to apply cross-market trading strategies, they must have multiple accounts on different exchanges that offer the desired products. In these cases, moving funds from one account to another is costly due to transaction fees. In addition, it can be time-ineffective as the transfer of funds is delayed. Hence, on these platforms, traders cannot arbitrage or hedge effectively.

One of Binance’s key competitive advantages is offering users a complete ecosystem for trading cryptocurrencies. Through Binance’s Futures division, users gain access to both the spot and futures markets.

Unlike other exchanges that offer a limited number of products, traders on Binance have access to over 100 spot markets and over 20 perpetual futures markets that provide trading and hedging opportunities.

Synergy between spot and futures markets

Binance, the world’s largest cryptocurrency platform, provides traders with a ready-made ecosystem to fully utilize their crypto assets and manage the risks of their cryptocurrency portfolio. This is made possible by the integration of Binance’s spot and futures platforms.

Given this holistic approach to building Binance Futures, as the number of traders on the platform has grown, trade volume and market share have grown exponentially :

Binance Futures Weekly Trading Volumes

In its first six months of operation, Binance Futures increased its weekly volume from $ 50 million in the first week to $ 16 billion on February 10, 2020. With new products since the beginning of the year, the platform has doubled its weekly volume.

Two key factors contribute to the successful integration of both platforms:

  1. Firstly, Binance Futures allows traders to transfer funds from spot wallets to the futures platform almost instantly, which helps to gain additional value from trading. In addition, traders do not pay transaction fees between the spot and futures platforms, unlike other exchanges where traders must have multiple trading accounts to access the futures market. In addition, Binance Futures does not impose any restrictions on the number of swaps between markets. For example, users can enter the futures markets multiple times a day to benefit from intraday price movements.
  2. Second, the Binance Futures team has designed their futures contract similar to spot trading, making it easier for users to navigate between markets. Perpetual contracts on the platform have clear pricing rules. Each contract represents only one unit of the corresponding underlying asset. In addition, Binance Futures perpetual contracts are denominated and settled in US dollars, just like in the spot market.

These factors have played an important role in platform integration as users can easily switch from one platform to another and have the same trading experience on them.

Arbitrage and real-time market data

With an easy transition between platforms, traders can effectively and quickly leverage the arbitrage opportunities of cryptoassets. Consequently, inefficiencies between perpetual contract prices and spot market prices are eliminated, resulting in matching between futures and spot markets.

Strong volatility can cause differences between markets, then arbitrage users will take advantage of these trading opportunities. On other exchanges, where arbitrage is more limited, the futures markets may not reflect the true value of the spot markets.

In addition, Financial Futures supports users by providing real-time market data, where the data is updated after every trade made on the platform, rather than every 100 milliseconds. As such, traders on Binance Futures can react to price changes faster than other platforms. It also helps users with arbitrage and hedging.

Cross-provisioning

Cross Collateral is a new feature that allows users to trade futures contracts using cryptoassets stored in the Binance exchange wallet as collateral. With this feature, users can use their coins to directly fund orders without having to convert them to margin.

Traders can borrow Tether (USDT) at 0% using their crypto assets as collateral, thereby eliminating the need to transfer coins to a futures wallet. Currently, only BUSD is available as collateral for this feature, more tokens will be added in the future.

Cross collateral is a welcome feature for traders on Binance, allowing more flexibility in how they open futures positions. This feature gives traders more access to the futures platform, which expands the Binance ecosystem.

The growing supply of altcoins on Binance Futures

Since the beginning of the year, Binance Futures has been actively expanding the number of perpetual futures contracts so that users can hedge existing positions and better manage their risk. The platform currently offers 21 perpetual futures contracts, with the latest added being VETUSDT.

With its growing portfolio of futures contracts, Binance Futures is emerging as the preferred position hedging platform for crypto traders. This is reflected in the growth in volume in the perpetual altcoin markets over the past two months.

BTC / USDT Daily Volume vs Altcoin Perpetual Contracts

Less than two months before the start of 2020, trading volume on perpetual contracts for altcoins narrowed the gap with the BTCUSDT contract. Prior to this, BTCUSDT contracts dominated trading volumes, accounting for over 70% of the total Binance Futures volume. With the emergence of new perpetual contracts, users have the opportunity to participate in the latest bullish momentum in the altcoin market.

Open interest in perpetual altcoin contracts

Collectively, open interest in the perpetual altcoin markets has grown from $ 20 million to $ 191 million – more than 10x growth in 2 months. Since the beginning of the year, open interest in altcoin perpetual contracts has rapidly increased from 10% of total open interest to 40%.

Output

Binance has built an ecosystem for cryptocurrency trading by integrating spot and futures platforms to provide a seamless and holistic trading experience for its users.

The strong synergy between spot and futures platforms is made possible by two key features:

  1. Ease of transferring funds between platforms.
  2. Intuitive futures contract design.

In addition, Binance Futures continues to expand the ecosystem by adding new features such as cross-collateral, a feature that allows users to use their cryptocurrency to fund positions on the futures platform.

The growing ecosystem is clearly a key competitive advantage of the Binance Futures platform, as evidenced by the growing open interest and trading volume in the perpetual altcoin markets. Binance Futures will continue to develop innovative features to improve access to its futures markets as well as further develop the entire ecosystem.

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