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

1 answers

• Nilsson DoyleApr 20, 2024 · a year ago
  Perpetual futures contracts and traditional futures contracts have distinct differences in the context of digital currencies. Perpetual futures contracts do not have an expiration date, which means that traders can hold positions for as long as they want. This is different from traditional futures contracts, which have a set expiration date. Additionally, perpetual futures contracts are settled daily, allowing traders to realize and settle profits and losses on a daily basis. On the other hand, traditional futures contracts are settled at the expiration date. Another difference is the use of funding rates in perpetual futures contracts. These rates help to balance the contract price with the spot price of the underlying asset. Traders who hold positions opposite to the current market sentiment pay these funding rates. This mechanism helps to keep the contract price in line with the spot price. In summary, perpetual futures contracts offer more flexibility and continuous trading compared to traditional futures contracts in the context of digital currencies.
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