Perpetual Swaps
A type of cryptocurrency derivative contract that never expires and uses funding rates to track the underlying asset price
What are Perpetual Swaps?
Perpetual swaps, also known as perpetual futures, are derivative contracts that allow traders to speculate on cryptocurrency prices without an expiration date. They use a funding rate mechanism to ensure the contract price closely tracks the underlying asset's spot price.
Key Features
Funding Rate
- Regular payments between longs and shorts
- Based on difference from spot price
- Usually paid every 8 hours
- Can be positive or negative
Trading Mechanics
- No expiration date
- Leveraged trading
- Mark price mechanism
- Continuous trading
Advantages
Benefits
- No expiry management
- High liquidity
- Efficient price tracking
- Simplified position management
Considerations
- Funding rate costs
- Liquidation risks
- Market manipulation risks
- Price divergence potential
Related Terms
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