How do perpetual contracts differ from futures contracts in the world of digital currencies?

3 answers

• Nifty Fifty SolutionsFeb 08, 2022 · 3 years ago
  Perpetual contracts and futures contracts are both popular trading instruments in the world of digital currencies. However, there are several key differences between the two. Perpetual contracts have no expiration date, while futures contracts have a specific expiration date. This means that perpetual contracts can be held indefinitely, allowing traders to maintain their positions for as long as they want. On the other hand, futures contracts have a fixed duration, typically ranging from a few days to several months. Another difference is the funding mechanism. Perpetual contracts use a funding rate to ensure that the contract price closely tracks the spot price of the underlying asset. This funding rate is exchanged between long and short positions every few hours. Futures contracts, on the other hand, do not have a funding mechanism and their prices may deviate from the spot price. Additionally, perpetual contracts often have higher leverage options compared to futures contracts, allowing traders to amplify their potential profits or losses. Overall, perpetual contracts offer more flexibility and continuous trading opportunities compared to futures contracts in the digital currency world.
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• Lofi CavesJan 18, 2021 · 5 years ago
  Perpetual contracts and futures contracts are similar in many ways, but there are a few key differences that set them apart. One major difference is the settlement method. Perpetual contracts settle in the digital currency itself, while futures contracts settle in cash. This means that when a perpetual contract expires, the trader receives or pays the digital currency equivalent of the contract value. In contrast, when a futures contract expires, the trader receives or pays the equivalent cash value. Another difference is the trading hours. Perpetual contracts can be traded 24/7, allowing traders to take advantage of price movements at any time. Futures contracts, on the other hand, have specific trading hours and are not available for trading around the clock. Additionally, perpetual contracts often have lower trading fees compared to futures contracts, making them more cost-effective for frequent traders. Overall, the choice between perpetual contracts and futures contracts depends on individual trading preferences and strategies.
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• kmaxAug 13, 2021 · 4 years ago
  Perpetual contracts and futures contracts have their own unique characteristics in the world of digital currencies. Perpetual contracts, as the name suggests, have no expiration date and can be held indefinitely. This allows traders to take long-term positions and benefit from the potential upside of digital currencies. Futures contracts, on the other hand, have a fixed expiration date, which means that traders need to carefully time their entry and exit points. Another difference is the funding mechanism. Perpetual contracts use a funding rate to ensure that the contract price closely tracks the spot price. This funding rate is exchanged between long and short positions, creating a balanced market. Futures contracts, however, do not have a funding mechanism and their prices may deviate from the spot price. Additionally, perpetual contracts often have higher liquidity compared to futures contracts, making it easier for traders to enter and exit positions. Overall, both perpetual contracts and futures contracts offer unique trading opportunities in the digital currency market, and the choice between the two depends on individual trading strategies and risk tolerance.
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