Perpetual markets are trading venues for derivative contracts that lack an expiration date, allowing positions to be held indefinitely. Unlike traditional futures contracts, perpetual contracts do not require physical settlement or periodic rollovers, instead using a funding rate mechanism to keep the contract price close to the underlying asset’s spot price. This structure offers traders continuous exposure to asset price movements without the complexities of managing expiry dates. They are highly popular in cryptocurrency trading due to their flexibility.
Context
Perpetual markets are a dominant feature of the digital asset trading landscape, frequently discussed in news concerning market liquidity, leverage trading, and price discovery for cryptocurrencies. The continuous nature of these markets and their funding rate mechanisms are central to understanding market dynamics. Regulatory scrutiny is increasing due to the high leverage often available and the potential for market manipulation, leading to calls for clearer oversight.
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