How Does the High Volatility of Cryptocurrencies Affect the Margin Requirements for Futures Contracts?

High volatility directly leads to higher margin requirements for cryptocurrency futures. Margin is collateral required to cover potential losses from adverse price movements.

Since crypto prices can move dramatically in a short time, the clearing house demands a larger initial margin to ensure that traders can cover potential daily mark-to-market losses. This is a crucial risk management measure to protect the integrity of the clearing system.