What are the differences between standard and perpetual futures in the cryptocurrency market?

3 answers

• Dec 16, 2021 · 3 years ago
  Standard futures and perpetual futures are two types of futures contracts commonly traded in the cryptocurrency market. Standard futures have a fixed expiration date, usually on a monthly basis, while perpetual futures do not have an expiration date. Perpetual futures are designed to mimic the spot market and provide continuous trading opportunities. They achieve this by using a funding mechanism to maintain the contract's price in line with the underlying asset's spot price. This funding mechanism ensures that the perpetual futures contract remains closely tied to the spot market, making it ideal for traders who want to hold positions for an extended period without worrying about contract expiration. On the other hand, standard futures contracts have a fixed expiration date, which means traders need to roll over their positions before the contract expires if they want to maintain exposure to the underlying asset. This rollover process introduces additional costs and complexities, making standard futures less suitable for long-term positions. However, standard futures offer the advantage of being more familiar to traditional futures traders and may provide more liquidity compared to perpetual futures in some cases. Traders should consider their trading strategies, time horizons, and risk management preferences when choosing between standard and perpetual futures in the cryptocurrency market.
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• Dec 16, 2021 · 3 years ago
  Standard futures and perpetual futures are two different types of futures contracts in the cryptocurrency market. Standard futures have a fixed expiration date, while perpetual futures do not expire. The key difference between the two lies in their settlement and expiration mechanisms. Standard futures contracts settle on the expiration date, where the buyer and seller exchange the underlying asset for the agreed-upon price. Perpetual futures, on the other hand, do not have a fixed expiration date. Instead, they use a funding mechanism to maintain the contract's price in line with the underlying asset's spot price. This funding mechanism ensures that the perpetual futures contract closely tracks the spot market, making it suitable for traders who want to hold positions for an extended period. In terms of funding rates, perpetual futures contracts have a funding rate that is periodically exchanged between long and short positions. This funding rate is used to incentivize traders to keep the contract's price aligned with the spot market. Standard futures contracts do not have a funding rate as they settle on the expiration date. When it comes to trading strategies and risk management, the choice between standard and perpetual futures depends on the trader's preferences and objectives. Traders who prefer a more traditional futures trading experience may opt for standard futures, while those who want continuous trading opportunities without worrying about contract expiration may choose perpetual futures.
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• Dec 16, 2021 · 3 years ago
  Standard and perpetual futures are two types of futures contracts commonly traded in the cryptocurrency market. Standard futures have a fixed expiration date, while perpetual futures do not expire. The key difference between the two lies in their settlement and funding mechanisms. Standard futures contracts settle on the expiration date, where the buyer and seller exchange the underlying asset for the agreed-upon price. Perpetual futures, on the other hand, use a funding mechanism to maintain the contract's price in line with the underlying asset's spot price. This funding mechanism involves a periodic funding rate that is exchanged between long and short positions. The funding rate ensures that the perpetual futures contract closely tracks the spot market. In terms of trading strategies, standard futures are more suitable for short-term trading and hedging, as they have a fixed expiration date. Perpetual futures, on the other hand, are ideal for traders who want to hold positions for an extended period without worrying about contract expiration. They provide continuous trading opportunities and are designed to mimic the spot market. When it comes to risk management, both types of futures contracts carry their own set of risks. Traders should carefully consider factors such as leverage, market volatility, and funding costs when choosing between standard and perpetual futures in the cryptocurrency market.
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