Perpetual Contract is an innovative cryptocurrency Futures market product. Unlike contracts on the traditional Spot Market, which are traded at the specific time at the specific price, in Futures two parties will make a trade on the contract with a settlement on a future date and a specific price. Perpetual Contract is a type of Futures Contract that doesn’t have an expiration date or settlement. BTCMEX.com offers Bitcoin Perpetual Contracts, which allow traders to keep their positions open for as long as they want. Perpetuals are also called Swap Contracts.
Let’s see how the contracts work on the exchange. For example, you purchase a Swap Contract for BTC/USD pair, with the price of crypto specified for the future. If you long (buy) and the Bitcoin price rises, you make a profit at the end of the contract, while you would suffer a loss if the price drops. On the contrary, if you short (sell) and the BTC price falls in value, you would make a profit, but would suffer a loss if the price rises.
High Leverage is an important feature of the Perpetual Contract. On BTCMEX you can trade BTC/USD Perpetual Contracts with the up to 100x Leverage. It allows traders to open positions and place the orders that are significantly larger than their Initial Margin. Initial Margin is the amount that a trader needs to invest to open a position and thus would be the percentage of the open position value held by a user. High Leverage is one of the main profit making instruments in cryptocurrencies Derivatives trading.
But what happens if the trader experiences loss? When the trader loses nearly all of his Initial Margin (the percentage of the open position value held at the beginning) his position is automatically closed. This process is called Liquidation. The trader whose position is liquidated losses his entire Margin.
BTCMEX uses Dual-Price Mechanism — an important measure to prevent market manipulations. To protect users from volume inflations and price fluctuations, which can cause unreasonable Liquidations on the platform, the Mark Price is used to trigger the Liquidation. The Last Traded Price (internal price) cannot trigger the Liquidation on the exchange. As mentioned, BTCMEX uses the Mark Price instead, which is derived from the Index Price (average market price) and is calculated equally from three exchanges Kraken, Coinbase, and Bitstamp (33.33% each). This means BTCMEX can’t influence the Liquidation internally. Once a Liquidation is triggered, the position will then be closed using the Last Traded Price.
When trading cryptocurrency Perpetual Contracts, every user needs to be aware of Funding — periodic payments exchanged between the buyer and seller. If the rate is positive, then longs will pay and shorts will receive the rate, and in the opposite way if the rate is negative. Funding is used to anchor the price of the Perpetual Contracts to the Bitcoin market price. On BTCMEX Funding occurs every 8 hours at 04:00, 12:00, and 20:00 Beijing time. The traders will only pay or receive Funding if they hold a position at one of these times. If the position is closed prior to the exchange, Funding will not be payed or received. BTCMEX does nor charge any fees on Funding. It is a direct peer-to-peer exchange.
BTCMEX Contract Details
On BTCMEX you can invest in an innovative type of Bitcoin Futures — Perpetual Contract with the up to 100x Leverage, Dual-Price Mechanism and the highest asset security measures. BTC/USD contracts are currently available on our platform.
