What are perpetual contracts and how do they work in the world of cryptocurrency?

3 answers

• Isa100Oct 07, 2024 · 9 months ago
  Perpetual contracts are a type of derivative product in the cryptocurrency market that allows traders to speculate on the price movements of various cryptocurrencies without actually owning the underlying assets. These contracts have no expiration date, hence the name 'perpetual'. They are designed to mimic the trading experience of spot markets, but with added leverage and the ability to profit from both rising and falling prices. Unlike traditional futures contracts, perpetual contracts do not require settlement or delivery of the underlying asset. Instead, they use a funding mechanism to maintain the contract's price in line with the spot market price. This funding mechanism ensures that the contract's price closely tracks the price of the underlying asset, preventing any significant divergence. Perpetual contracts are popular among traders who want to take advantage of short-term price movements in the cryptocurrency market without actually owning the assets.
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• Himanshu SinghMar 19, 2021 · 4 years ago
  Perpetual contracts are like the cool kids of the cryptocurrency trading world. They offer traders the ability to speculate on the price of cryptocurrencies without actually owning them. These contracts are perpetual, meaning they don't have an expiration date. So you can keep trading them as long as you want. Unlike traditional futures contracts, perpetual contracts don't require you to settle or deliver the underlying asset. Instead, they use a funding mechanism to keep the contract's price in line with the spot market price. This means that the price of the perpetual contract will closely track the price of the underlying asset. It's a great way for traders to profit from both rising and falling prices in the crypto market. Just be careful with the leverage though, it can be a double-edged sword!
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• Kring ThorntonJun 11, 2023 · 2 years ago
  Perpetual contracts are a type of derivative product that allows traders to speculate on the price movements of cryptocurrencies without actually owning them. These contracts have no expiration date, which means you can hold them for as long as you want. Unlike traditional futures contracts, perpetual contracts don't require you to settle or deliver the underlying asset. Instead, they use a funding mechanism to keep the contract's price in line with the spot market price. This funding mechanism ensures that the contract's price closely follows the price of the underlying asset, making it an attractive option for traders who want to profit from short-term price movements in the cryptocurrency market. Perpetual contracts are available on various cryptocurrency exchanges and offer traders the opportunity to use leverage to amplify their potential profits. However, it's important to note that leverage can also increase the risk of losses, so it's crucial to use it responsibly and manage your risk effectively.
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