How do perpetual futures work in the context of cryptocurrency trading?

3 answers

• panaNov 02, 2024 · 8 months ago
  Perpetual futures are a type of derivative contract that allows traders to speculate on the price movement of cryptocurrencies without actually owning the underlying asset. These contracts have no expiration date, which means they can be held indefinitely. They are settled in cryptocurrency and typically use a funding rate mechanism to ensure the contract's price aligns with the spot market price. Traders can go long or short on perpetual futures, allowing them to profit from both rising and falling prices. The leverage offered by these contracts amplifies potential gains or losses, making them popular among experienced traders looking for higher risk and reward opportunities.
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• BsratMay 02, 2022 · 3 years ago
  Perpetual futures are like regular futures contracts, but with a few key differences. Unlike traditional futures contracts that have an expiration date, perpetual futures contracts do not expire. This means that traders can hold their positions for as long as they want. Additionally, perpetual futures contracts are settled in cryptocurrency, which means that the profits and losses are settled in the same cryptocurrency as the contract. The funding rate mechanism used in perpetual futures ensures that the contract's price stays close to the spot market price. This mechanism involves a periodic exchange of funding payments between long and short positions to maintain the contract's price stability. Overall, perpetual futures provide traders with a flexible and efficient way to trade cryptocurrencies with leverage and without the need for physical ownership of the underlying asset.
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• Nikhil Kumar SinghJul 21, 2022 · 3 years ago
  Perpetual futures are a popular trading instrument in the cryptocurrency market. They are offered by various exchanges, including BYDFi. These contracts allow traders to speculate on the price movement of cryptocurrencies without actually owning them. Perpetual futures have no expiration date, which means traders can hold their positions for as long as they want. They are settled in cryptocurrency, and the contract's price is closely tied to the spot market price through a funding rate mechanism. This mechanism ensures that the contract's price stays in line with the underlying asset's price. Traders can go long or short on perpetual futures, allowing them to profit from both rising and falling prices. The leverage offered by these contracts can amplify potential gains or losses, so it's important for traders to manage their risk accordingly. Overall, perpetual futures provide traders with a flexible and efficient way to trade cryptocurrencies with leverage and without the need for physical ownership of the underlying asset.
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