Definition ∞ Perpetual contracts are derivative instruments that allow traders to speculate on the price of an underlying asset without an expiration date. Unlike traditional futures contracts, these agreements do not require physical delivery of the asset. Instead, they utilize a funding rate mechanism to keep the contract price closely aligned with the spot market price of the underlying cryptocurrency. They are primarily used for leverage and hedging.
Context ∞ Perpetual contracts are a dominant trading instrument in cryptocurrency markets, facilitating high-volume speculation and risk management. Discussions frequently address the risks associated with extreme leverage, liquidation cascades, and the impact of funding rates on market dynamics. Future developments may involve enhanced regulatory oversight, the introduction of more sophisticated risk management tools, and the potential integration of perpetual contracts with new asset classes or DeFi primitives. The stability of these contracts during periods of high volatility is a persistent concern.
Blockchain Knowledge
Cryptocurrency Foundation
Cryptospace Newsfeed
