What is a Perpetual Contract?
Perpetual Contract A perpetual contract is a derivative similar to leveraged spot trading, settled in cryptocurrencies such as BTC, USDT, etc. Investors can profit from the rise in the price of digital currencies by buying long, or from the decline by selling short. Unlike traditional futures, perpetual contracts have no expiry date, thus there are no time limitations on holding positions. To ensure that it tracks the underlying price index, perpetual contracts use a funding fee mechanism to keep its price closely aligned with that of the underlying asset.
Market Mechanisms of Perpetual Contracts When trading perpetual contracts, traders need to be aware of several mechanisms in the futures market, among which the key aspects to note include:
Position Marking: Perpetual contracts use a fair price marking method. The mark price determines unrealized profits or losses and the liquidation price.
Initial and Maintenance Margins: These crucial margin levels determine how much leverage can be used and at what price a forced liquidation will occur.
Funding Fees: A fee paid regularly every 8 hours between buyers and sellers. If the rate is positive, long positions pay and short positions receive the funding rate; if negative, the reverse applies. Payments or receipts of funding fees occur only if the position is held at the funding timestamp.
Funding Fee Timestamps: 08:00 (UTC+8), 16:00 (UTC+8), and 24:00 (UTC+8). Users can find the current funding rate under "Contract Details" at the bottom left of the trading options page. This rate can also be found in one's personal "Contract Details," and historical rates can be seen in the funding rate history.
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