The Double-Edged Sword of Perpetual Futures: Insights from Crypto Traders

When discussing crypto trading with experienced traders, the topic of perpetual futures, or 'perps,' inevitably comes up. These derivatives contracts allow traders to control large positions with minimal capital, but they also come with unique challenges. To better understand the world of perps, CoinDesk spoke with traders who have thrived in this market, including Lucas Krenn, a derivatives trader at STS Digital, and Kenneth Ong, an independent trader. Both traders emphasized the importance of perps in the crypto ecosystem, particularly for altcoins, where dated futures contracts are often illiquid. Perps offer better fills, lower fees, and the ability to run both long and short positions simultaneously, making them an attractive option for traders. However, the funding rate, which is charged every eight hours, can be a significant burden for traders, especially if the market doesn't move as expected. As Krenn noted, 'It is unquantifiable at the point of trade and unhedgeable afterwards.' Ong also expressed concern over the funding rate, stating that it can 'potentially balloon to the point where a profitable trade loses money.' Despite these challenges, perps have become a staple in the crypto market, with traders like Krenn and Ong relying on them to manage risk and capitalize on opportunities. As the market continues to evolve, it's likely that perps will play an increasingly important role in shaping the future of crypto trading.