Perpetual futures contracts are a type of derivative financial agreement that allows traders to speculate on the future price of an asset, typically a cryptocurrency, without an expiry date. Unlike traditional futures, these contracts do not settle physically or expire, enabling positions to be held indefinitely. A funding rate mechanism is employed to keep the contract price closely tied to the underlying asset’s spot price. They offer significant leverage and liquidity in digital asset markets.
Context
Perpetual futures contracts are a prominent instrument in cryptocurrency trading, frequently featured in news analyses of market sentiment and volatility. The mechanisms of funding rates and liquidation are often discussed, especially during periods of significant price movement. Regulators globally are examining how to classify and oversee these complex derivatives to protect investors and maintain market stability.
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