What is Perpetual Futures?

*What is Perpetual Futures?

Perpetual Futures is an innovative financial derivative in crypto space, which is similar to traditional futures but has no expiration or settlement. Traders only need to focus on the ups and downs of price, making it an easy-to-use instrument. Moreover, it provides higher leverage than the traditional futures.

To ensure long-term convergence between the perpetual futures price and the mark price, we use a “funding rate” to equilibrium price. There are several key concepts that you should know in futures trading.

Mark Price: To avoid market manipulation and ensure that the price of the Perpetual Futures matches the Spot price, we use the mark price to calculate the unrealized profit and loss.

Initial & Maintenance Margin: You should be very familiar with the Initial and Maintenance Margin levels, especially the Maintenance Margin. Once your margin is lower than the maintenance margin, your position will be liquidated. It is strongly recommended that close your positions above the maintenance margin to avoid higher costs due to liquidation.

Funding Rate: Payments between all longs and shorts in the Perpetual Futures Market. The Funding Rate determines which party is the payer and the payee. If the rate is positive, longs pay short; If negative, shorts pay longs.

Risk: Unlike Spot Markets, Futures Markets allow you to place large orders that are not fully covered by their initial collateral. This is known as ‘margin trading’. As markets have become more technologically advanced, the amount of available margin has increased.

We have a series of policies and measures to prevent you from going bankrupt and protect the interests of the exchange, which we will explain further in other articles.