What are some key differences between perpetual futures and traditional futures in the cryptocurrency market?

3 answers

• Mickeyy04Jun 12, 2020 · 5 years ago
  Perpetual futures and traditional futures are both derivative financial instruments used in the cryptocurrency market, but they have some key differences. Perpetual futures, also known as perpetual swaps, are contracts that do not have an expiration date. They are designed to closely track the price of the underlying asset, usually a cryptocurrency, through a funding mechanism. Traditional futures, on the other hand, have a fixed expiration date and are settled at that time. They require the buyer and seller to agree on a specific price and quantity of the underlying asset to be delivered or received in the future. One advantage of perpetual futures is that they allow traders to hold positions indefinitely without worrying about contract expiration. This makes them more flexible and convenient for traders who want to take long-term positions or engage in hedging strategies. Traditional futures, on the other hand, provide more certainty as they have a fixed settlement date. This can be advantageous for traders who prefer a clear timeline for their trades. Another difference between perpetual futures and traditional futures is the funding mechanism. Perpetual futures use a funding rate that is exchanged between long and short positions to maintain the contract's price close to the spot price. This funding rate is periodically settled and can result in additional costs or profits for traders. Traditional futures, on the other hand, do not have a funding mechanism and are settled at a predetermined price. In terms of trading volume and liquidity, perpetual futures are often more popular than traditional futures in the cryptocurrency market. This is because perpetual futures allow traders to enter and exit positions more easily, as there is no need to find a counterparty for each trade. Traditional futures, on the other hand, may have lower trading volume and liquidity due to the need for counterparties. Overall, the choice between perpetual futures and traditional futures depends on the trader's preferences and trading strategies. Perpetual futures offer more flexibility and convenience, while traditional futures provide more certainty. Traders should consider factors such as contract expiration, funding costs, and trading volume when deciding which type of futures contract to trade.
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• AmirhosseinJan 03, 2023 · 3 years ago
  Perpetual futures and traditional futures are two different types of futures contracts used in the cryptocurrency market. Perpetual futures, also known as perpetual swaps, are contracts that do not have an expiration date, while traditional futures have a fixed expiration date. This difference in expiration dates affects how the contracts are settled. Perpetual futures are settled using a funding mechanism that ensures the contract's price closely tracks the spot price of the underlying asset. This funding mechanism involves the exchange of funding rates between long and short positions. The funding rate is periodically settled and can result in additional costs or profits for traders. Traditional futures, on the other hand, are settled at a predetermined price and quantity of the underlying asset. Another key difference between perpetual futures and traditional futures is the flexibility they offer to traders. Perpetual futures allow traders to hold positions indefinitely without worrying about contract expiration. This makes them more suitable for traders who want to take long-term positions or engage in hedging strategies. Traditional futures, on the other hand, have a fixed settlement date, which provides more certainty but also requires traders to manage their positions accordingly. In terms of trading volume and liquidity, perpetual futures are often more popular than traditional futures in the cryptocurrency market. This is because perpetual futures allow traders to enter and exit positions more easily, as there is no need to find a counterparty for each trade. Traditional futures, on the other hand, may have lower trading volume and liquidity due to the need for counterparties. Overall, the choice between perpetual futures and traditional futures depends on the trader's preferences and trading strategies. Traders should consider factors such as contract expiration, funding costs, and trading volume when deciding which type of futures contract to trade.
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• Richard AndemApr 05, 2022 · 3 years ago
  Perpetual futures and traditional futures are two different types of futures contracts used in the cryptocurrency market. Perpetual futures, also known as perpetual swaps, are contracts that do not have an expiration date, while traditional futures have a fixed expiration date. This difference in expiration dates affects how the contracts are settled. Perpetual futures use a funding mechanism to maintain the contract's price close to the spot price of the underlying asset. This funding mechanism involves the exchange of funding rates between long and short positions. The funding rate is periodically settled and can result in additional costs or profits for traders. Traditional futures, on the other hand, are settled at a predetermined price and quantity of the underlying asset. One advantage of perpetual futures is that they allow traders to hold positions indefinitely without worrying about contract expiration. This makes them more flexible and convenient for traders who want to take long-term positions or engage in hedging strategies. Traditional futures, on the other hand, provide more certainty as they have a fixed settlement date. In terms of trading volume and liquidity, perpetual futures are often more popular than traditional futures in the cryptocurrency market. This is because perpetual futures allow traders to enter and exit positions more easily, as there is no need to find a counterparty for each trade. Traditional futures, on the other hand, may have lower trading volume and liquidity due to the need for counterparties. It's important to note that the information provided here is for educational purposes only and should not be considered as financial advice. Traders should conduct their own research and consult with a professional financial advisor before making any investment decisions.
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