🚨📈 What is a perpetual contract in #trading of #cryptomonnaies

🔶 A perpetual contract in cryptocurrency trading is a financial product that tracks the price of the underlying cryptocurrency. Perpetual contracts are used to speculate on the evolution of the price of a crypto-asset upwards or downwards without buying it spot.

🔶 A perpetual contract #BTC allows for example to trade Bitcoin in a decentralized way without holding it in a wallet. For example, the dYdX platform allows you to trade Bitcoin perpetual contracts and other cryptocurrencies.

🏛️ How does a crypto perpetual contract work?

🟢 Long and short positions.

Cryptocurrency perpetual contract trading allows you to bet on the price going up via a long position and on the downside via a short selling position. Perpetual contracts are therefore used to try to anticipate market movements and thus take advantage of the volatility of a crypto.

Applying leverage to a perpetual contract allows you to multiply potential gains, however this trading tool requires extra caution, as potential losses are also multiplied.

🟢 Financing rates

Funding rates allow a trading platform to reproduce the price of an asset on the market by balancing users' long and short positions. Indeed, an imbalance would lead to a decorrelation of the price of the perpetual contract compared to the price of the underlying asset on the market.

🟢 The maintenance margin.

A crypto perpetual contract that has no expiration date. When their maintenance margin reaches the minimum threshold, the trader receives a margin call to add funds, otherwise their position will be liquidated by #protocole to reimburse their losses.