Perpetual Futures Explained

Decoding Perpetual Futures Contracts

Perpetual futures contracts are a popular derivative in the cryptocurrency market. This article clarifies their intricacies and benefits, especially for retail investors.

Perpetual Futures vs. Traditional Futures: Key Differences

Unlike traditional futures contracts with fixed expiry dates, perpetual futures contracts have no expiration. This continuous trading offers flexibility but introduces unique risks. CoinDesk Indices Head of Product and Research, Andy Baehr, explains these nuances in a recent "Markets Daily" podcast episode hosted by Jennifer Sanasie.

Why are Perpetual Futures Attractive to Retail Investors?

The podcast delves into the reasons behind the popularity of perpetual futures among retail investors. Factors such as leverage, 24/7 trading, and the ability to hedge against price volatility are explored. However, it's crucial to understand the inherent risks associated with these contracts, including liquidation risk due to price swings and potential margin calls.

Understanding the Risks

• Liquidation Risk: Sudden price movements can lead to liquidation of your position if the margin requirements aren't met.
• Margin Calls: Brokers may issue margin calls if your position's value falls below a certain level, requiring you to deposit additional funds.
• Complexity: Understanding the mechanics of perpetual futures requires a solid grasp of financial markets.

Disclaimer: This information is for educational purposes and should not be considered investment advice. Investing in cryptocurrencies carries significant risk. Always conduct thorough research before making any investment decisions.

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This episode was hosted by Jennifer Sanasie and produced by Jennifer Sanasie and Victor Chen.