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 with six years of experience. Both traders emphasized the importance of perps in the crypto market, particularly for altcoins, where dated futures 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.
Krenn and Ong warned that the funding rate can 'balloon' and turn a profitable trade into a loss. Despite these challenges, perps have become a crucial tool for traders, allowing them to manage risk efficiently across different venues and tokens. The always-on nature of perps has also shifted price discovery, enabling traders to react to news and events in real-time.
As the crypto market continues to evolve, it's likely that perps will play an increasingly important role, but traders must be aware of the potential pitfalls, particularly the volatile funding-rate exposure that can't be quantified or hedged.