How does a perpetual contract differ from a traditional futures contract in the cryptocurrency industry?

3 answers

• Dec 26, 2021 · 3 years ago
  A perpetual contract is a type of derivative product in the cryptocurrency industry that has no expiration date. Unlike traditional futures contracts, which have a fixed expiration date, perpetual contracts can be held indefinitely. This means that traders can hold their positions for as long as they want without worrying about the contract expiring. Perpetual contracts also have a funding mechanism that helps to keep the contract's price in line with the underlying asset's price. This funding mechanism ensures that the contract's price closely tracks the spot price of the cryptocurrency, making it an attractive option for traders who want to trade the underlying asset without actually owning it.
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• Dec 26, 2021 · 3 years ago
  In contrast, traditional futures contracts have a fixed expiration date, usually set for a specific month in the future. Traders who hold futures contracts must either close their positions before the expiration date or roll them over to a new contract. This can be a hassle for traders who want to hold their positions for an extended period of time. Additionally, futures contracts often require traders to post margin, which can tie up a significant amount of capital. Perpetual contracts, on the other hand, typically do not require traders to post margin, making them more capital-efficient.
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• Dec 26, 2021 · 3 years ago
  From BYDFi's perspective, perpetual contracts offer traders a flexible and convenient way to trade cryptocurrencies. With no expiration date and no requirement to post margin, traders can easily enter and exit positions without the hassle of managing contract expirations or tying up capital. The funding mechanism in perpetual contracts also helps to ensure that the contract's price closely tracks the spot price of the underlying cryptocurrency, reducing the risk of price manipulation. Overall, perpetual contracts provide traders with more freedom and flexibility in their trading strategies.
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