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If you’re a seasoned trader keen on trading options such as futures contracts, this is just for you. Here’s a simple guide to what crypto perpetual futures contracts are and how they are beneficial to traders.
Cryptocurrency, perpetual futures contracts, are similar to traditional futures contracts with the exception that there is no expiry date. This means that the two parties do not have to pre-decide an end date.
With futures contracts, two parties come to an agreement on the price of specific assets and the date when the transaction would occur. Since the price is pre-determined, irrespective of the market value of those assets on the given date, the transaction will happen at the fixed amount.
In the case of perpetual futures contracts, there is no end date or expiry date. This means that the two parties can hold their position for as long as they want without any end date. Here are the advantages of perpetual futures contracts.
1. You can HODL and maximize your profits. Since you can hold your positions indefinitely, it allows you to look at the long-term trend, analyze and then decide a price accordingly, which allows you to make more money.
2. It’s better capital since you’re not investing all of your money but using margins to complete these trades. Now, the risk of you going into loss is lesser since there’s no end date. Thus taking margins becomes more beneficial.
3. You can benefit from both sides. Whether the market value increases or decreases, you can profit from both. All you need to do is do your research well and make as accurate a prediction as possible.
4. Furthermore, it reduces the risks of losing money by hacking. Cyberattacks are not new to the world of crypto, and the threat is pretty imminent. With perpetual futures contracts, you consistently have lesser funds in your account/wallet. Thus the damages that a cyberattack can cause are reduced to a large extent.
5. In futures contracts, traders are exposed to fiat currencies, and there’s an additional layer of transaction involved. However, with perpetual futures contracts, that isn’t the case. You can complete transactions in cryptocurrencies itself.
6. The transaction cost, as a result, becomes much lower since that additional layer of fiat currencies is removed.
Perpetual futures contracts in cryptocurrency are valuable to the list of trading options with quite a few advantages. However, one needs to become a seasoned trader before stepping into this space since it requires a lot of research, analysis, and good prediction ability.