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

3 answers

• Dec 26, 2021 · 3 years ago
  A perpetual contract is a type of derivative product in the cryptocurrency market that does not have an expiration date. It is designed to mimic the features of a traditional futures contract, but without a fixed settlement date. This means that traders can hold a perpetual contract indefinitely, as long as they meet the margin requirements. On the other hand, a traditional futures contract has a fixed expiration date, after which the contract is settled. Perpetual contracts are often used for trading cryptocurrencies with leverage, allowing traders to amplify their potential profits or losses.
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• Dec 26, 2021 · 3 years ago
  Perpetual contracts and traditional futures contracts have some similarities, but there are important differences to be aware of. One key distinction is the funding mechanism used in perpetual contracts. Unlike traditional futures contracts, perpetual contracts have a funding rate that is exchanged between long and short positions every few hours. This funding rate helps to keep the perpetual contract price closely aligned with the underlying spot market price. Another difference is the way in which perpetual contracts handle the settlement of funding fees. In perpetual contracts, funding fees are exchanged between traders based on the funding rate, while in traditional futures contracts, settlement occurs at the contract's expiration date.
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• Dec 26, 2021 · 3 years ago
  Perpetual contracts offer a unique trading experience compared to traditional futures contracts. With perpetual contracts, traders can take advantage of the benefits of leverage without being constrained by an expiration date. This flexibility allows traders to hold positions for longer periods of time, which can be particularly useful in volatile cryptocurrency markets. Additionally, perpetual contracts often have lower trading fees compared to traditional futures contracts, making them an attractive option for active traders. BYDFi, a popular cryptocurrency exchange, offers a wide range of perpetual contracts with competitive trading conditions and a user-friendly interface.
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