What are the key variations between futures and perpetual contracts when trading cryptocurrencies?

5 answers

• Dec 16, 2021 · 3 years ago
  Sure! Futures contracts are agreements to buy or sell an asset at a predetermined price and date in the future. They have an expiration date and are settled at that time. On the other hand, perpetual contracts are similar to futures contracts but do not have an expiration date. They can be held indefinitely as long as the trader maintains the required margin. Perpetual contracts also have a funding mechanism to ensure the contract price closely tracks the spot price of the underlying asset. Both futures and perpetual contracts allow traders to go long or short, but perpetual contracts offer more flexibility in terms of holding positions for longer periods without the need to roll over contracts.
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• Dec 16, 2021 · 3 years ago
  When it comes to leverage, both futures and perpetual contracts offer the ability to trade with leverage. However, perpetual contracts usually have higher leverage options available compared to futures contracts. This can be beneficial for traders looking to amplify their potential profits or losses. It's important to note that trading with leverage can also increase the risk, so it's crucial to manage risk effectively and use proper risk management strategies.
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• Dec 16, 2021 · 3 years ago
  As an expert at BYDFi, I can tell you that one key difference between futures and perpetual contracts is the funding mechanism. Perpetual contracts have a funding mechanism that is used to ensure the contract price stays close to the spot price of the underlying asset. This funding mechanism involves the exchange transferring funds between long and short positions to maintain balance. This mechanism helps prevent the contract price from deviating too far from the spot price, which can be advantageous for traders.
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• Dec 16, 2021 · 3 years ago
  Futures contracts are more commonly offered by traditional financial institutions and regulated exchanges, while perpetual contracts are more commonly offered by cryptocurrency exchanges. This is because perpetual contracts are a relatively new innovation in the cryptocurrency market and have gained popularity due to their flexibility and lack of expiration dates. It's important to choose a reputable exchange when trading either futures or perpetual contracts to ensure the safety of your funds and the integrity of the trading platform.
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• Dec 16, 2021 · 3 years ago
  The key variations between futures and perpetual contracts when trading cryptocurrencies can be summarized as follows: futures contracts have an expiration date, while perpetual contracts do not; perpetual contracts have a funding mechanism to maintain the contract price close to the spot price; perpetual contracts offer more flexibility in holding positions without the need to roll over contracts; and perpetual contracts are more commonly offered by cryptocurrency exchanges. Understanding these differences can help you make an informed decision when choosing between futures and perpetual contracts for your trading strategy.
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