What is the difference between ethereum perpetual futures and traditional futures contracts?

3 answers

• Dec 25, 2021 · 3 years ago
  Ethereum perpetual futures and traditional futures contracts are both financial instruments used in the cryptocurrency market, but they have some fundamental differences. Perpetual futures contracts, also known as perpetual swaps, are a type of derivative contract that allows traders to speculate on the price of Ethereum without actually owning the underlying asset. These contracts have no expiration date and can be held indefinitely. On the other hand, traditional futures contracts have a fixed expiration date and require the physical delivery of the underlying asset at maturity. One key difference between the two is the funding mechanism. Perpetual futures contracts use a funding rate to ensure the contract's price closely tracks the spot price of Ethereum. This funding rate is exchanged between long and short positions and helps to prevent the contract from deviating too far from the underlying asset's price. Traditional futures contracts, on the other hand, do not have a funding mechanism. Another difference is the cost of holding the positions. Perpetual futures contracts have a funding rate that is periodically exchanged between long and short positions. This means that traders who hold positions for a longer period may incur funding costs. Traditional futures contracts, on the other hand, do not have this funding cost. In terms of trading hours, perpetual futures contracts are available for trading 24/7, while traditional futures contracts have specific trading hours. This makes perpetual futures contracts more flexible for traders who want to enter or exit positions at any time. Overall, the key differences between ethereum perpetual futures and traditional futures contracts lie in their expiration dates, funding mechanisms, cost of holding positions, and trading hours. Traders should consider these factors when choosing the most suitable instrument for their trading strategies.
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• Dec 25, 2021 · 3 years ago
  The difference between ethereum perpetual futures and traditional futures contracts can be summarized in a few key points. Perpetual futures contracts are designed to mimic the price of Ethereum and allow traders to speculate on its future value without actually owning the cryptocurrency. These contracts have no expiration date and can be held indefinitely. On the other hand, traditional futures contracts have a fixed expiration date and require the physical delivery of the underlying asset at maturity. One of the main advantages of perpetual futures contracts is their ability to provide leverage. Traders can enter larger positions with a smaller amount of capital, which can amplify both profits and losses. Traditional futures contracts also offer leverage, but it is typically lower compared to perpetual futures. Another difference is the funding mechanism. Perpetual futures contracts use a funding rate to ensure the contract's price closely tracks the spot price of Ethereum. This funding rate is exchanged between long and short positions and helps to prevent the contract from deviating too far from the underlying asset's price. Traditional futures contracts, on the other hand, do not have a funding mechanism. In terms of trading hours, perpetual futures contracts are available for trading 24/7, while traditional futures contracts have specific trading hours. This makes perpetual futures contracts more flexible for traders who want to enter or exit positions at any time. Overall, the choice between ethereum perpetual futures and traditional futures contracts depends on the trader's risk appetite, trading strategy, and preference for leverage and flexibility.
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• Dec 25, 2021 · 3 years ago
  When it comes to ethereum perpetual futures and traditional futures contracts, there are a few key differences that traders should be aware of. Perpetual futures contracts, also known as perpetual swaps, are derivative contracts that allow traders to speculate on the price of Ethereum without owning the underlying asset. These contracts have no expiration date and can be held indefinitely. Traditional futures contracts, on the other hand, have a fixed expiration date and require the physical delivery of the underlying asset at maturity. One of the main differences between the two is the funding mechanism. Perpetual futures contracts use a funding rate to ensure the contract's price closely tracks the spot price of Ethereum. This funding rate is exchanged between long and short positions and helps to prevent the contract from deviating too far from the underlying asset's price. Traditional futures contracts, on the other hand, do not have a funding mechanism. Another difference is the cost of holding positions. Perpetual futures contracts have a funding rate that is periodically exchanged between long and short positions. This means that traders who hold positions for a longer period may incur funding costs. Traditional futures contracts, on the other hand, do not have this funding cost. In terms of trading hours, perpetual futures contracts are available for trading 24/7, while traditional futures contracts have specific trading hours. This makes perpetual futures contracts more flexible for traders who want to enter or exit positions at any time. In conclusion, ethereum perpetual futures and traditional futures contracts have distinct differences in terms of expiration dates, funding mechanisms, cost of holding positions, and trading hours. Traders should carefully consider these factors when choosing the most suitable instrument for their trading strategies.
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