Your wallet is ready, but navigating the world of contract trading can be confusing. What do these contracts mean? What's the purpose of delivery? This guide provides a comprehensive breakdown of cryptocurrency contract types.
1. Futures Contracts
Also known as periodic contracts, futures contracts are agreements to buy or sell an asset at a predetermined price on a future date. The asset can be:
- Physical commodities (e.g., crude oil, gold)
- Digital currencies
- Other financial instruments
👉 Learn how futures work in crypto markets
Settlement occurs either through:
- Physical delivery
- Cash settlement
2. Delivery Contracts
These are specialized futures contracts with:
- Fixed expiration dates
- Unique pricing characteristics
Delivery contracts trade at either:
- Premium (above spot price)
- Discount (below spot price)
This price difference reflects market expectations about future delivery prices.
3. Perpetual Contracts
The dominant contract type in crypto trading, perpetual contracts:
- Function like leveraged spot trading
- Settle in BTC/USDT/etc.
- Allow both long and short positions
- Lack expiration dates
Key features:
- Track spot price indices
- Maintain near-parity with spot prices
- Use a funding rate mechanism (unique to perpetuals)
👉 Master perpetual trading strategies
4. Funding Rate Mechanism
This keeps perpetual contract prices aligned with spot markets. Key details:
- Settles every 8 hours
- Paid between position holders
Timestamps (UTC+8):
- 08:00
- 16:00
- 24:00
Payment direction depends on:
- Positive rate: Longs pay shorts
- Negative rate: Shorts pay longs
5. Contract Pricing Methods
Crypto contracts use two pricing models:
USDT-Margined Contracts
- Collateral: USDT
- Trade multiple instruments
- Profits settled in USDT
Coin-Margined Contracts
- Collateral: Cryptocurrency
Ideal for:
- Existing coin holders
- Investors seeking coin accumulation
- BTC/ETH traders
FAQ Section
Q: Which contract type is best for beginners?
A: USDT-margined perpetual contracts offer simpler risk management for newcomers.
Q: How often does funding occur in perpetual contracts?
A: Every 8 hours at three fixed times daily.
Q: What's the main advantage of delivery contracts?
A: They provide price certainty for future dates, useful for hedging.
Q: Can I lose more than my initial investment?
A: Yes, leveraged contracts may liquidate positions beyond your collateral.
Q: Which pricing method has lower volatility risk?
A: USDT contracts avoid coin price fluctuations affecting your collateral value.
Q: Are perpetual contracts available for all cryptocurrencies?
A: No, only major coins with sufficient liquidity typically have perpetual markets.
Remember: Always understand a contract's mechanics before trading. Each type serves different strategic purposes in cryptocurrency markets.