How does the concept of perpetual futures differ from traditional futures contracts in the context of cryptocurrencies?

1 answers

• May 07, 2022 · 3 years ago
  Perpetual futures contracts and traditional futures contracts in the context of cryptocurrencies have some key differences. Perpetual futures contracts do not have an expiration date, while traditional futures contracts have a fixed expiration date. This means that perpetual futures contracts can be held indefinitely, providing traders with more flexibility. Additionally, perpetual futures contracts are settled daily, meaning that profits and losses are realized on a daily basis. Traditional futures contracts, on the other hand, are settled on the expiration date. Another difference is that perpetual futures contracts often use a funding rate mechanism to ensure that the contract price closely tracks the spot price of the underlying cryptocurrency. This funding rate is paid between long and short positions, helping to maintain the contract's price stability. Overall, perpetual futures contracts offer more flexibility and continuous trading compared to traditional futures contracts in the context of cryptocurrencies.
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