Decoding perpetual contracts in the cryptocurrency world: the pros and cons of a double-edged sword
In the cryptocurrency world, perpetual contracts, also known as non-delivery contracts, are often mentioned. They are similar to futures but have no fixed expiration date, allowing investors to operate in both directions - going long or short, and earning the difference based on market trends. This flexibility makes contract trading a focus of controversy: some people see it as a high-risk game, while others see it as a shortcut to rapid wealth growth.
Why does contract trading attract so many eyes?
The primary reason is the pursuit of a growth rate that exceeds the norm. Small capital players wait for a bull market in the spot market, and even if they succeed, the returns may still be insufficient. Contract trading, through the leverage effect, can theoretically achieve a substantial increase in asset value in a short period of time, satisfying some investors' desire for high returns. Furthermore, the two-way trading mechanism of the contract makes investors feel more "fair" when facing market uncertainties, reducing the potential risk of only being able to go long.
Analysis of the core elements of contract trading:
Leverage: a double-edged sword that can both amplify profits and accelerate losses. Under high leverage (such as 100 times), small price fluctuations may lead to huge changes in profits and losses, and temptation and risk coexist. Funding rate: a mechanism to keep the contract price close to the spot market, and achieve market balance by paying or collecting fees regularly. Fees are calculated based on transaction volume and leverage multiples. Handling fee: transaction costs charged by the exchange, including taker and maker fees, charged in both directions, and the specific rate depends on the exchange policy. Liquidation: risk warning, when the account funds are insufficient to maintain the current position, the trading platform will force liquidation, which may be accompanied by high handling fees. Setting a reasonable stop loss price is an important measure to prevent liquidation.
Perpetual contracts may become a tool for wealth growth for investors with strong self-control and high risk awareness; but for investors who are impulsive, have great financial pressure or have a gambling mentality, it may be the beginning of a disaster. Before entering this field, be sure to think carefully and act within your means.
If you have been chasing the ups and downs, are often trapped, have no latest news in the cryptocurrency world, and have no direction, please click on the avatar to follow me, and you will find more information on the homepage, including bull market strategies, escape techniques, and logic for screening potential coins.