How do perpetual future contracts work in the context of digital currencies?

1 answers

• Ifoghale UzeziFeb 21, 2022 · 3 years ago
  Perpetual future contracts in the context of digital currencies are an innovative trading instrument that allows traders to gain exposure to the price movement of digital currencies without actually owning them. These contracts have no expiration date, which means that traders can hold their positions for as long as they want. The contract's price is derived from the spot price of the digital currency, and it typically includes a funding rate that is exchanged between long and short positions. This funding rate helps maintain the contract's price in line with the spot price and prevents large deviations. Perpetual future contracts are popular among traders due to their ability to use leverage, which allows them to amplify their potential profits. However, it's important to note that leverage can also increase the risk of losses, so traders should exercise caution and use risk management strategies when trading perpetual future contracts.
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