Discussing crypto trading with experienced traders often leads to the topic of perpetual futures, or 'perps', which are derivatives contracts allowing traders to control larger positions with less capital. Unlike standard futures, perps have no expiration date, making them a preferred choice for traders of altcoins, where dated futures are often illiquid. Traders praise perps for their deep liquidity, low trading fees, and high margin efficiency, enabling them to manage risk effectively across various venues and tokens.
However, the funding rate, a recurring cost for keeping positions open, is a significant concern, as it can add up over time and impact trade profitability. The perpetual nature of perps has also shifted price discovery to occur around the clock, rather than just during market hours.
While perps offer advantages such as better fills, lower fees, and the ability to run both long and short positions simultaneously, they also come with unique challenges, including liquidations and funding rate exposure. Experienced traders emphasize the importance of understanding these risks and the need for a liquid dated curve in crypto to mitigate them.
Until then, the funding rate remains a significant consideration for traders navigating the leveraged market of perpetual futures.