🌐 Global Asset Watch｜Crypto Class｜Issue 001
What exactly are perpetual contracts? How are they different from spot trading?
When many people are new to crypto, they tend to confuse spot trading with perpetual contracts.
The simplest way to understand them:
Spot = Buy and hold an asset
Perpetual contract = Trade the price direction of an asset
For example, if you use USDT to buy BTC on the spot market, you actually own BTC. You generally profit when its price rises, and ordinary spot trading does not involve contract liquidation.
Perpetual contracts, on the other hand, are derivatives with no fixed expiration date. They let you:
📈 Go Long: Bet on prices rising
📉 Go Short: Bet on prices falling
⚙️ Use leverage: Make your capital go further
To keep perpetual contract prices as close as possible to spot prices, there is an important mechanism:
Funding Rate
Typically:
Positive funding rate → Longs pay shorts
Negative funding rate → Shorts pay longs
Although perpetual contracts allow trading in both directions, they also carry higher risks, including:
Leverage risk, liquidation risk, funding costs, and sharp price swings.
One thing to keep in mind:
Leverage won’t make your judgment more accurate. It only makes gains and losses change faster relative to your margin.
So what really matters isn’t how much leverage you use, but:
Position management + stop-losses + leverage control + trading discipline.
In a nutshell:
Spot trading is more about “holding an asset,” while perpetual contracts are more about “trading price direction.”
📌 Next issue｜Thursday Web3 Encyclopedia｜Issue 002
“What exactly is blockchain? Why is its data so difficult to tamper with?”
#crypto #Web3 $BNB
$ETH
What exactly are perpetual contracts? How are they different from spot trading?
When many people are new to crypto, they tend to confuse spot trading with perpetual contracts.
The simplest way to understand them:
Spot = Buy and hold an asset
Perpetual contract = Trade the price direction of an asset
For example, if you use USDT to buy BTC on the spot market, you actually own BTC. You generally profit when its price rises, and ordinary spot trading does not involve contract liquidation.
Perpetual contracts, on the other hand, are derivatives with no fixed expiration date. They let you:
📈 Go Long: Bet on prices rising
📉 Go Short: Bet on prices falling
⚙️ Use leverage: Make your capital go further
To keep perpetual contract prices as close as possible to spot prices, there is an important mechanism:
Funding Rate
Typically:
Positive funding rate → Longs pay shorts
Negative funding rate → Shorts pay longs
Although perpetual contracts allow trading in both directions, they also carry higher risks, including:
Leverage risk, liquidation risk, funding costs, and sharp price swings.
One thing to keep in mind:
Leverage won’t make your judgment more accurate. It only makes gains and losses change faster relative to your margin.
So what really matters isn’t how much leverage you use, but:
Position management + stop-losses + leverage control + trading discipline.
In a nutshell:
Spot trading is more about “holding an asset,” while perpetual contracts are more about “trading price direction.”
📌 Next issue｜Thursday Web3 Encyclopedia｜Issue 002
“What exactly is blockchain? Why is its data so difficult to tamper with?”
#crypto #Web3 $BNB
$ETH