Cryptocurrency circle reveals: What on earth are perpetual contracts?

Dear friends in the cryptocurrency circle, let's talk about the perpetual contract that people love and hate today. It sounds high-end, but in fact, it is a bit like futures, but it does not have a fixed "expiration date". You can play it whenever you want, and you can buy both rising and falling. Isn't it exciting?

Why do so many people like it? To put it bluntly, it's because spot money is too slow to make money! Think about it, you have to wait for one or two years to buy spot. When the bull market comes, your coins have increased several times. Hey, when you count the money, it's still tens of thousands of yuan. Don't you think it's frustrating? Not to mention that if the bull market doesn't come, or your coins don't increase much, wouldn't it be a big loss? Therefore, many people have set their sights on contracts, thinking that this is a good way to quickly accumulate original funds.

However, contracts are not a joke. There are several key points that you have to understand:

The first one is leverage! This is a double-edged sword. It can make you rich, but it can also make you bankrupt overnight. Think about it, with a 100x leverage, you can double your money with a slight price fluctuation, but at the same time, if you lose, it will be a blink of an eye. Many people start with a low leverage, and when they lose, they are unwilling to increase the leverage. As a result, you know, it is only a matter of time before the position is liquidated.

The second is the funding rate. Perpetual contracts follow the spot price. In order to prevent them from being too different, the exchange has set a funding rate to adjust. If you are long, you may have to pay the short seller; if you are short, it is the other way around. This rate is calculated every 8 hours, so you have to know it.

The third is the handling fee. This is like a toll, you have to pay it for both buying and selling. The specific amount depends on your transaction volume and leverage, and whether you are a taker or a maker.

Finally, and most importantly, liquidation! If the price drops to the forced liquidation line you set, then sorry, the platform will help you "stop loss" and close your position. However, the handling fee at this time is very high, so you have to set a stop loss price yourself and leave some room to avoid being forced to close by "insertion".

In summary, if you have poor self-control, strong desire to win, like to gamble easily, and have great financial pressure, then don't touch the contract.Otherwise, the market will teach you how to behave.