There’s a cost to holding a position that’s on the opposite side of the market sentiment.
You can keep a perpetual contract open as long as you want - or as long as you can afford it.
A short position is a bet the price will go down. A long position is a bet on the price going up. Perpetual futures trades are just a bet on price, whether up or down. Perpetual trading is popular because it’s waaaay easier than traditional futures trading, and you can bet on the price of all sorts of weird cryptos - or even real-world fiat currencies - without the risk of actually owning any of them. You can still bet on the future price, but you don’t ever have to take delivery, and the contract never expires. Well, that’s where crypto perpetual contracts come in, also called perpetual trading, perpetual swaps, or just perpetuals. Yeah, you can lose money with futures too.īuuuut - what if you never had to take delivery of the Bitcoin? Maybe you weren’t wrong about the price direction, just a bit early. Bitcoin could have fallen to, say, $16,000 by the expiration date. Of course, it could have gone the other way, too. Now, let’s look at a crypto example with Perpetual Swaps. This is a physical settlement because you’ll deliver one real-world bowling ball next Thursday in exchange for $50 cash. Price: $50 for one bowling ball (the spot price). Item and quantity: One bowling ball (the asset or commodity). There are three parts to this futures deal: When you buy Bitcoin or another crypto on an exchange, you’re paying the spot price, not the next-Thursday price. It gets its name from “on the spot,” meaning the amount you’d pay to buy it right now. That agreed price is called the spot price. If there’s a nationwide bowling ball shortage and the value of bowling balls shoots up to $200, it doesn’t matter. Both parties know the date and the price. 
It’s like when you make a deal with your bowling buddy to sell him your spare bowling ball for $50 next Thursday when he gets paid. In a traditional crypto futures contract, two traders agree to buy and sell a crypto asset on or before a future date. Crypto Funding Rates & Perpetuals, Explained Don’t worry - it’s not as confusing as it might sound. Sound good? Let’s dig in and figure this funding rate stuff out together.
#BYBIT VS BINANCE FEES HOW TO#
We’ll learn how to calculate crypto funding rates and explore some ways to use them to make money. And they can do this through something called crypto funding rates.īasically, one side of the trade pays the other side of the trade to keep this thing going, umm, perpetually. Perpetuals act like futures contracts, but they don’t expire. A futures contract is an agreement to buy or sell at a certain price on a certain date in the future (the expiry date), but crypto trading often uses perpetual contracts instead.
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