When discussing crypto trading with experienced traders, the topic of perpetual futures, or 'perps,' inevitably comes up. These derivatives contracts enable traders to control larger positions with less capital.
Unlike standard futures, perps have no expiration date, making them a popular choice among traders. For altcoin traders, perps are often the only viable option for derivatives trading due to the illiquidity of dated futures and the spot market.
Traders who have thrived in the perps market cite deep liquidity, low trading fees, and efficient margin usage as key benefits. However, they also express concerns about funding rates, which can add up over time and impact profitability.
The traders note that perps are not just a tool, but a necessity, especially for crypto-native firms. They offer better fills, lower fees, and the ability to run both long and short positions simultaneously. The perpetual nature of perps allows for price discovery to occur at any time, not just during market hours.
Despite the benefits, traders warn about the risks associated with funding rates, which can be volatile and difficult to hedge. They emphasize that perps are not without their unique challenges, but for many traders, the advantages outweigh the drawbacks.