What are the differences between perpetual swaps and traditional futures contracts in the world of digital assets?

3 answers

• Nov 29, 2021 · 3 years ago
  Perpetual swaps and traditional futures contracts are both popular trading instruments in the digital assets industry. However, there are several key differences between the two. Firstly, perpetual swaps do not have an expiration date, while traditional futures contracts have a fixed expiration date. This means that perpetual swaps can be held indefinitely, allowing traders to maintain their positions for as long as they want. Secondly, perpetual swaps are settled in cryptocurrency, usually the same cryptocurrency as the underlying asset being traded. On the other hand, traditional futures contracts are settled in cash. This means that traders of perpetual swaps do not need to worry about physical delivery of the underlying asset. Lastly, perpetual swaps often have funding rates that are used to maintain the price of the contract in line with the spot market. These funding rates are paid between long and short positions, and help to prevent the contract from deviating too far from the spot price. Traditional futures contracts do not have funding rates. Overall, perpetual swaps offer more flexibility and convenience compared to traditional futures contracts, making them a popular choice among digital asset traders.
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• Nov 29, 2021 · 3 years ago
  Perpetual swaps and traditional futures contracts are like apples and oranges in the world of digital assets. While both are derivatives contracts, they have distinct characteristics. Perpetual swaps, as the name suggests, are perpetual in nature. They do not have an expiration date, allowing traders to hold their positions for as long as they desire. On the other hand, traditional futures contracts have a fixed expiration date, which means traders need to close their positions before the contract expires. Another key difference is the settlement method. Perpetual swaps are settled in cryptocurrency, usually the same cryptocurrency as the underlying asset. This means that traders receive or pay the cryptocurrency equivalent of their profit or loss. In contrast, traditional futures contracts are settled in cash, which means traders receive or pay the cash equivalent of their profit or loss. Lastly, perpetual swaps often have a funding mechanism to ensure the contract's price aligns with the spot market. This funding mechanism involves the payment of funding rates between long and short positions. Traditional futures contracts do not have this funding mechanism. In summary, perpetual swaps offer greater flexibility and continuous trading compared to traditional futures contracts. However, traders should carefully consider their risk tolerance and trading strategy before choosing between the two.
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• Nov 29, 2021 · 3 years ago
  Perpetual swaps and traditional futures contracts are two popular trading instruments in the digital assets industry. While both serve similar purposes, there are some key differences to be aware of. Perpetual swaps, also known as perpetual contracts, are derivative contracts that do not have an expiration date. This means that traders can hold their positions indefinitely, without worrying about contract expiration. On the other hand, traditional futures contracts have a fixed expiration date, after which the contract is settled. Another difference is the settlement method. Perpetual swaps are settled in cryptocurrency, usually the same cryptocurrency as the underlying asset being traded. This allows traders to directly participate in the digital assets market. Traditional futures contracts, on the other hand, are settled in cash, which means traders receive or pay cash based on the difference between the contract price and the settlement price. Lastly, perpetual swaps often have a funding mechanism to maintain the contract's price in line with the spot market. This funding mechanism involves the payment of funding rates between long and short positions. Traditional futures contracts do not have this funding mechanism. In conclusion, perpetual swaps offer more flexibility and convenience for traders in the digital assets industry. However, traditional futures contracts still have their own advantages and may be more suitable for certain trading strategies.
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