Get the weekly summary of crypto market analysis, news, and forecasts! This Week’s Summary The crypto market ends the week at a total market capitalization of $2,17 trillion. Bitcoin continues to trade at around $62,300. Ethereum experiences no changes and stagnates at around $2,400. XRP is down by 2%, Solana by 1%, and Dogecoin by 3%. Almost all altcoins are trading in the red, with very few exceptions. The DeFi sector decreased the total value of protocols (TVL) to around…
Perpetual Contracts for Cryptocurrencies – A Beginner’s Guide
3.2 k views
Perpetual contracts trading makes up a significant percentage of overall exchange-traded cryptocurrency volumes. Investors looking to bet on the price developments of BTC and other crypto assets are often not too concerned about holding actual tokens but are instead interested in trading highly liquid cryptocurrency derivatives such as perpetual futures contracts.
Perpetual futures contracts on cryptocurrencies are financial derivatives enabling traders to bet on the price movements of crypto assets using leverage without owning the underlying digital asset.
A futures contract is an agreement between two trading counterparties to buy (or sell) an asset at a specific price at a predetermined date in the future. A perpetual futures contract is effectively the same as a futures contract, with the critical difference being that they have no expiry date.
The funding rate is the difference between the perpetual futures price and the underlying asset or reference index’s price. The funding rate is either paid or received, depending on whether you are short or long.
Regardless of the technical variances between trading crypto and perpetual futures, the underlying trading procedure is identical, implying that any trader with a basic understanding of online trading can also trade perpetual crypto contracts.
Advantages of Perpetual Contract Trading
Since flexibility is the name of the game, perpetual contract trading is a tool that allows you to conduct both short and long trades, unlike spot trading, which is unidirectional.
Therefore, you are not stuck with a loss-making trade even in a bear market or during weekends, considering the nature of the cryptocurrency market, which has no bank holidays. Furthermore, the only time exchanges are not in operation is when there is scheduled maintenance, of which traders are given prior notice.
The increased leverage of perpetual contracts further improves their allure. Up to 100x leverage on perpetual contracts, trades are available on some exchanges. This certainly makes the potential investor profits larger, attracting investors, but they are risky. The essence of perpetual contracts is the possibility of starting little and building up your portfolio through profit maximization.
How Secure Are Perpetual Contracts?
Undoubtedly, the security of crypto exchanges is vital for the digital asset ecosystem, which is why there is a growing need for impenetrable security that fosters confidence, preventing hesitation from the public.
In all this, the fact remains that blockchains are not the problem. For example, it is not economically viable to reverse BTC transactions through a majority attack due to the computing power required and the creator’s inherent protective mechanism. The sources of all these hacks can be zeroed in on third parties.
Exchanges’ hot wallets and users are prone to attacks such as phishing. When hackers strike, they steal funds and sensitive personal data demanded in KYC, such as passport pictures, social security numbers, and home addresses. For this reason, the security of an exchange’s fund must be collaborative.
Ultimately, the security of initial margins depends on how robust the exchange’s security is. If security is guaranteed, trading cryptocurrency derivative products will be a resounding success. Below are some of the tactics employed by most exchanges to boost security:
- Mandatory KYC and AML procedures
- Regular third-party testing of the exchange’s security systems
- Segregation of the internal network from the web
- Wallet protection and storage of most funds in cold multi-signature wallets are often distributed across different geographies.
- Cryptographical multifactor verification for sensitive operations
Trading Bitcoin Perpetual Contracts
Perpetual contracts for Bitcoin, also referred to as perpetual swaps, are a prevalent form of futures contract mostly dominated by BitMEX exchange.
The XBT/USD perpetual swap is one of the flagship products offered by BitMEX. It is similarly provided by exchanges OKEx, Cryptofacilities, and Deribit, the main competitors to BitMEX, offering Bitcoin derivatives products.
BTC derivatives, predominantly perpetual swaps on BitMEX, gained enormous popularity last year, with the Chicago Mercantile Exchange (CME) and other BTC derivatives platforms all seeing record volumes in the closing months of 2019.
To help you picture the volumes involved, BitMEX has constant 24-hour BTC futures volumes of about $2 billion and saw approximately $79 billion in futures volume in May 2019.
Perpetual swaps launched the BTC derivatives market with remarkable acclaim, mainly because of their enormous leverage. As a result, bitcoin derivatives platforms have continued to attract a mixture of both professional and retail investors. However, a recent analysis by BitMEX reveals that traders often do not use the maximum leverage (100x leverage on perpetual swaps) because they have minimal success rates if they do.
More Exchanges Are Developing Perpetual Contracts
More and more crypto trading platforms offer investors diverse ways to use leverage to capture perpetual contracts. One of the most prominent exchanges to do this is Liquid, a Japanese-based exchange that has developed lucrative perpetual agreements with up to 100x leverage.
The BTC contract on Liquid unveiled on January 27, 2020, is based on an index price referencing the real-time prices of five cryptocurrency exchanges: Bitstamp, Coinbase, Gemini, Kraken, and Liquid. The index price takes the BTC price from these five exchanges, discards the highest and lowest values, and calculates an average between the remaining three.
Similarly, in March 2020, Singapore-based crypto futures exchange Bybit introduced the addition of Tether (USDT) perpetual contracts. By adding the stablecoin to its existing futures contracts, Bybit intends to facilitate investors with improved flexibility, as they can now hold long and short positions concurrently.
On March 31, 2020, Huobi derivatives markets (DM), a trading platform that supports cryptocurrency futures and perpetual contracts, introduced perpetual swaps that allow users to hedge risk better and access leveraged arbitrage opportunities during volatile or unstable market conditions.
Ciara Sun, VP of global business operations at Huobi Group, explained that perpetual swaps offer traders another valuable tool to help them take advantage of market movements to create arbitrage opportunities.
Conclusion
Generally, perpetual contracts don’t have an expiry date, which is advantageous over the futures market. Because there’s no expiry, speculative traders and investors alike can have a hassle-free trading environment where they can hedge and even hold trades as long as they want. Moreover, there are no added costs apart from funding costs, settled hourly or, on some exchanges, every eight hours.
Furthermore, there is usually a possibility for leverage trading of up to 100x. Since the leverage is high, traders can open or close a position with only a fraction of their account balance. Therefore, contracts offer the potential to make a higher return from a smaller initial outlay than investing directly in the underlying security.
Btc
Bitcoin
$62.547
price
price
0.84959%
price change
As institutional funds progressively enter the crypto markets, many expect crypto derivatives products to increase and mature. Perpetual contracts represent a fascinating method for no-expiry futures contracts directly in BTC and other digital assets. Their rising popularity amongst top exchanges such as Huobi and BitMEX only underlines their staying power in the broader market.
Previous
Messari CEO Says $3 Billion in Stablecoins are On the Sidelines
Next
Hong Kong Has Approved the First Cryptocurrency Fund Targeting $100 Million
Written by
Wayne Jones
@wjones
561 posts
More author posts
How SolidProof Ensures Transparency and Security through Audit and KYC Systems
Solidproof is among the most trusted blockchain security and smart contract auditing companies in the crypto market today. The Germany-based company aims to fix the security and transparency issues smothering the crypto space. But, unfortunately, as the industry attains more progress, so do the opportunities for bad actors to victimize honest investors. According to a yearly report on crypto crimes by Chainalysis, $14 billion of all transactions in crypto in 2021 were associated with scams or money laundering. These figures…
3 years ago
The Importance of Backtesting Crypto Investment Strategies
Crypto backtesting involves running and applying a specific trading strategy to historical market data to evaluate how it would have performed. The analytical method delivers a clear overview of qualified strategies that can be applied in a real-world environment using real capital. The mathematical simulation provided by crypto backtesting is an essential component that traders use to analyze past market data and ultimately develop an effective trading system. The process can empower investors to pick out a crypto strategy that…
3 years ago
aelf Announces Its First Metaverse-Themed Hackathon with Money Prizes
aelf network has announced its metaverse-themed Hackathon, “Top of OASIS,” which will take place on December 12, 2021. The platform encourages all potential participants to advance their project proposals by February 9, 2022. Additionally, aelf will offer full support to all the projects participating in the Hackathon. Developers can register their blockchain projects, including DeFi and GameFi proposals, and compete for spots in aelf's prizes pool. Top of Oasis Hackathon Main Dates Top of OASIS is aelf’s first metaverse-themed blockchain…
3 years ago
Institutional Investors who have Expanded their Portfolio in 2021
Cryptocurrency and blockchain investments from the first nine months of 2021 have surpassed last year's total. In the first half of 2021, the worldwide crypto and blockchain activity was $8.7 million, more than double last year's figures. It is a significant sign that institutional money is streaming into crypto. Furthermore, it increases the investor base, and thus the institutional awareness and knowledge of this sector are also surging. The "institutional adoption" of crypto is already underway. Today we focus on…
4 years ago
Understanding Cardano, IOHK, and EMURGO
Cardano is the first decentralized public blockchain platform developed on a research-first-driven approach. Charles Hoskinson, the co-founder of Ethereum, created it in 2015 and later launched it in 2017. It comprises a development team of global researchers and engineers. This platform's development continued thanks to academics, computer scientists, and their peer-reviewed papers. The Cardano ecosystem involves three founding entities that work together. These partners are EMURGO, IOHK Company, and The Cardano Foundation. Cardano in a Nutshell Cardano is a public…
4 years ago
Billionaires Who Have Publicly Showed Interest in Cryptocurrencies
The cryptocurrency boom of 2017 saw a rise in their acceptance from prominent economic figures. Since then, their volatility has continued significant investments in them. Today there's a push for their global mass adoption. Industry-leading lights and renowned celebrities have expressed their support for the assets. Nothing best captures this reality than Forbes's recent list of the world's wealthiest people. It indicates a growth in the number of crypto billionaires over time. From an asset that courted controversy and skepticism,…
4 years ago
Publish your own article
Guest post article. Guaranteed publishing with just a few clicks
START PUBLISHING ADVERTISE WITH USBrowse categories
Explore trending topics in the crypto community right now.
Bitcoin
SEC Greenlights Multiple Bitcoin ETFs, Signaling Major Leap for Cryptocurrency Markets
The U.S. Securities and Exchange Commission (SEC) has made a landmark decision by approving 11 spot bitcoin exchange-traded funds (ETFs). This move represents a significant moment in the cryptocurrency industry, marking a shift towards greater institutional adoption and accessibility for investors. The approved ETFs include products from major firms such as BlackRock’s iShares Bitcoin Trust, Grayscale Bitcoin Trust, ARK 21Shares Bitcoin ETF, Bitwise Bitcoin ETP Trust, WisdomTree Bitcoin Fund, Fidelity Wise Origin Bitcoin Trust, VanEck Bitcoin Trust, Invesco Galaxy Bitcoin…
Marius Bogdan Dinu 
@bdinu89
@bdinu89
1 year ago 
596 views
Bitcoin Should be Banned in the United States: Charlie Munger
Berkshire Hathaway’s vice chairman, Charlie Munger, called for a ban on cryptocurrency in the United States on Monday, similar to the one in China. In an op-ed published with the Wall Street Journal, Munger argued that Bitcoin isn’t a currency, commodity, or security, but simply a form of gambling “ with a nearly 100% edge for the house. As such, the enactment of a federal law should ban such things from happening. Munger cited the Chinese communist party’s ban on…
2 years ago 1.5 k views
Tesla’s BTC Positions Remained Unchanged in Q4 of 2022
According to a new earning report from automotive manufacturer Tesla, the company did not sell any of its BTC holdings in the fourth quarter of 2022. Amid speculations that the company had traded BTC during the testing bears, CEO Elon Musk revealed it was yet holding on to its BTC stash. Tesla Maintains Holdings After Initial Sell-Off In Q2 of 2022, Tesla opted to sell 75% of all its BTC. The car manufacturer received close to $950M in exchange. Notably,…
2 years ago 1.5 k views
Here’s When Grayscale Debates the SEC in Court on its Bitcoin Spot ETF
The District of Columbia Court of Appeals has marked a date for when Grayscale and the Securities and Exchange Commission (SEC) may present oral arguments regarding the approval of a Bitcoin spot ETF. Each side will present its case at 9:30 am ET on March 7, with the SEC arguing against the product, and Grayscale arguing in favor. Grayscale VS SEC The court date – revealed in a court order filed on Monday according to CNBC – is much earlier…
2 years ago 1.8 k views
Ethereum
Ethereum’s Zhejiang Staking Withdrawal Testnet for Shanghai is Live
At 15:00 UTC on Wednesday, the much-anticipated Zhejiang testnet for staking withdrawal went live on Ethereum’s Beacon chain. Zhejiang will enable the testing of the Ethereum Improvement Proposal (EIP) 4895 which allows for staking withdrawals. This is in preparation for the network’s next major update, the Shanghai hard fork slated to launch sometime in March. Users Can Make Simulated Withdrawals with Zhejiang In a tweet yesterday, DevOps engineer at Ethereum foundation Barnabas Busa gave details about the Zhejiang testnet slated…
2 years ago 1.6 k views
Ethereum Devs Disagree Over Technical Tweak as Shanghai Upgrade Nears
Post-merge Ethereum users have been eagerly awaiting the commencement of the network’s next major upgrade, Shanghai. However, after over 3 months of prep time, it appears the Shanghai rollout isn’t going as smoothly as expected. What Exactly is the Shanghai Upgrade? In September last year, the much-publicized Ethereum Merge also known as the Ethereum 2.0 upgrade went live. Ethereum underwent some significant changes as its consensus mechanism transitioned from proof-of-work to a cost-efficient proof-of-stake system. However, since the Beacon launch…
2 years ago 1.6 k views
FTX Hacker Converts 50k Stolen ETH to BTC
Per a report from blockchain analysis firm Chainalysis, the attacker behind the Nov 11 FTX exploit, is converting the stolen ETH to Bitcoin. There were muted fears the seemingly inexperienced perpetrator could dump all its ETH holdings. On Sunday, the attacker dumped 50k ETH on-chain, with ETH's price dipping by almost 7%. https://twitter.com/chainalysis/status/1594349583416840199?s=20&t=pgvQHeVytI20eKQ1ls9bxw Hacker Moves 50,000 ETH to New Address Over the past week, the perpetrator had been steadily swapping the cryptocurrencies they had carted off for Ether tokens. This…
3 years ago 1.9 k views
Censorship Concerns: 51% of Ethereum Blocks Now OFAC Compliant
According to new data, over half of the blocks on the Ethereum network now reportedly comply with the US Treasury OFAC’s standards. This comes roughly a month after the platform’s monumental merge update. Phasing Out Tornado Cash The Office of Foreign Assets Control is the intelligence and enforcement agency of the US Treasury Department. Indeed, the OFAC administers and enforces US financial sanctions. A prime example of this is the recent, highly-publicized ban on crypto mixer Tornado Cash. According to…
3 years ago 1.8 k views
Trading
How to Leverage Arbitrage Opportunities in Crypto Markets
Cryptocurrency arbitrage has become an increasingly popular investment strategy as the crypto market grows and evolves. Arbitrage involves taking advantage of pricing discrepancies between markets or exchanges to profit. Investors can leverage profit opportunities by understanding cryptocurrency arbitrage while managing associated risks. In this guide, we'll explore cryptocurrency arbitrage and how it works. A Bitcoin-related example will help us illustrate the concepts of this strategy. What is Arbitrage and How Does it Work in Crypto Markets Crypto arbitrage trading is…
2 years ago 3 k views
The Different Types of Copy Trading in Crypto
Are you interested in trading cryptocurrencies but feel intimidated by the complexity of the process? Copy trading is a great way to get into crypto without needing to be an experienced trader. With copy trading, investors can benefit from the experience and knowledge of more experienced traders, allowing even beginners to succeed. How does copy trading work, and which tips do you need to know to succeed? In this article, we'll explore all aspects of copy trading in crypto. What…
2 years ago 1.7 k views
How to Spot an Unsafe Crypto Exchange
Cryptocurrency exchanges have become increasingly popular as they provide a platform for people to buy and sell digital assets. Unfortunately, not all crypto exchanges are safe or reliable. With the rise of cybercrime and fraud, you must learn to spot an unsafe crypto exchange before investing your money. This guide will help beginners identify and avoid potential risks when selecting a cryptocurrency exchange. The Role of Crypto Exchanges on the Digital Assets Market Cryptocurrency exchanges play a crucial role in…
2 years ago 2.2 k views
What Is Grid Trading in Crypto?
Crypto grid trading has become a popular strategy because of its ability to help traders capitalize on market volatility. Grid trading means you can produce consistent profits by taking advantage of price differences in different markets or time frames. By establishing buy and sell orders at predetermined intervals, you can take advantage of these fluctuations in an automated way. This guide will explore the different aspects of grid trading and provide an overview of its benefits, challenges, and more. Through…
2 years ago 1.6 k views
Tech
Introducing una Messenger: A Paradigm Shift in Blockchain Connectivity
The digital landscape is set for an unprecedented transformation with the introduction of una Messenger, the latest innovation from web3 development powerhouse Wemade. This platform represents an evolution of the "PAPYRUS Messenger," serving as the cornerstone of the ambitious "unagi" initiative, aimed at catalyzing the mass adoption of blockchain technology. The "Unbound Networking & Accelerating Growth Initiative" seeks to bridge the divides between diverse blockchain services and networks, heralding a new era of interconnectedness. A New Frontier in Blockchain Communication…
Marius Bogdan Dinu
@bdinu89
@bdinu89
1 year ago 574 views
Bit2Me Champions WEMIX Token in Pioneering European Listing
Bit2Me, Spain's premier virtual asset exchange, has recently broadened the horizons for cryptocurrency enthusiasts by listing WEMIX, the cornerstone token of the WEMIX3.0 blockchain ecosystem. This marks a notable achievement as WEMIX's inaugural venture into the European market, emphasizing the token's role in facilitating a range of blockchain-based activities, from gaming transactions to decentralized finance (DeFi) applications. Launched with the intention to democratize access to WEMIX for the 450 million Spanish speakers around the globe, this strategic move aligns with…
Marius Bogdan Dinu
@bdinu89
@bdinu89
1 year ago 404 views
CryptoVirally Expands with Fresh Crypto Marketing Offers and Cointelegraph Upgrades
In an exciting update for the cryptocurrency marketing landscape, CryptoVirally has announced a series of new entries and enhancements to its already comprehensive range of services. These updates, aimed at providing tailored marketing solutions for crypto projects, include new limited-time offers and expanded options for Cointelegraph publications. Limited Offers: A Game-Changer in Crypto Marketing CryptoVirally's limited offers section presents an enticing opportunity for crypto projects to leverage high-impact marketing services at discounted rates. These offers, available for a limited period,…
Marius Bogdan Dinu
@bdinu89
@bdinu89
1 year ago 465 views
Breaking Boundaries in Blockchain: WEMIX’s ‘una Wallet’ Sets New Standard for Multi-Chain Asset Management
The WEMIX Foundation has unveiled 'una Wallet,' a revolutionary digital wallet designed to offer unparalleled convenience and security in managing digital assets across various blockchain networks. The announcement, made on January 17, 2024, signifies a new era in the seamless integration of multiple blockchain protocols, including Arbitrum, Avalanche, BNB Smart Chain, Ethereum, Kroma, Optimism, Polygon, and WEMIX3.0. 'una Wallet' is more than just a digital wallet; it represents the culmination of WEMIX's innovative efforts in the blockchain space. It serves…
Marius Bogdan Dinu
@bdinu89
@bdinu89
1 year ago 592 views