One of the advantages of Binance Futures is that you can use BTC as margin and it can be settled in BTC. This means that you must also post an initial margin in BTC.
Why are these all benefits of Binance? Using BTC allows large traders (whales) and even retail traders to hedge their BTC holdings. How would they do this? For example, they can open a short position. If the price of BTC drops, they can offset their USD losses with their BTC profits. In other words, the USD value of BTC may drop, but they will have gained more Bitcoin by profiting from their short position.
In addition, these contracts are also a good way to increase your Bitcoin holdings. Since they are all settled in BTC, if you make a profit, you can effectively increase the number of Bitcoins you hold.
Binance Futures can also open up good arbitrage opportunities for large traders. Let's take a general look at how it works.
There are two concepts we need to understand here: contango and backwardation. Contango refers to the trading price of a futures contract being higher than the spot price of the underlying asset. Backwardation, on the other hand, is when futures contracts are trading at a discount to the spot market price.
In both cases, large institutional traders (such as whales or hedge funds) can profit from the difference between spot and futures prices, however small that difference may be. They do this by simultaneously buying futures contracts and selling spot assets, or vice versa. However, this often requires complex hedging and risk management strategies and is not recommended for beginners.
