Perpetuals
Perpetuals are cryptocurrency derivatives that allow traders to speculate on the prices of cryptocurrencies without having to take ownership of them. They provide an opportunity for traders to make leveraged bets and hedge their positions through perpetual contracts. Perpetuals, also known as “perps”, are often used by traders who want exposure to a particular asset without taking ownership of it or having any expiry date associated with the contract.
The basic structure of a perpetual involves two parties agreeing on the rights and obligations for both sides in a trade agreement, along with terms related to margin requirements and funding rates. The buyer will pay an upfront premium which is determined by current market conditions, while the seller will receive regular payments from this same premium throughout the duration of trading activity. Both parties also agree upon liquidation rules if one side’s position becomes too large relative to their financial capacity or if there is significant volatility in price movements later down the line.
When trading perpetuals, users can select between different leverage levels depending on how much risk they want to take on when placing their trades. Leverage allows users to increase their potential returns but also amplifies losses – so it’s important that those considering using leverage understand its risks before utilizing it within these types of agreements. There is no fixed expiry period for perpetual contracts meaning that once opened they remain open until closed out by either party involved in trading activities or canceled due some other external factor such as extreme changes in price movements or unexpected policy announcements from government authorities regarding cryptocurrency regulation etc..
In conclusion, perpetuals offer traders an alternative way for speculating on cryptocurrency markets via derivative instruments without necessarily needing physical possession over assets themselves – making them attractive investment options among more experienced cryptocurrency investors looking for higher-risk/higher-return opportunities within crypto markets compared traditional spot exchanges where smaller amounts are usually traded at lower margins than what’s offered through perps products
