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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