When discussing crypto trading with experienced traders, the topic of perpetual futures, or 'perps,' inevitably arises. These derivatives contracts allow traders to control large positions with minimal capital. Unlike traditional futures, perps have no expiration date, making them a popular choice among traders.
However, they also come with unique challenges, particularly regarding funding rates and margin efficiency. To better understand the world of perps, we 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 emphasized the importance of perps in the crypto space, citing their deep liquidity, low trading fees, and efficient margin usage.
Nevertheless, they also expressed concerns about the funding rates, which can add up over time and negatively impact trading profits. The traders pointed out that perps have become a necessary tool for many crypto traders, especially those dealing with altcoins, as dated futures contracts often lack liquidity.
The ability to trade perps has democratized access to futures trading, but it also introduces new risks, such as exposure to volatile funding rates. As the crypto market continues to evolve, it is essential for traders to understand the intricacies of perps and their potential impact on trading strategies.
By exploring the benefits and drawbacks of perps, traders can make more informed decisions and navigate the complex world of crypto trading.