Perpetual Swap: The Never‑Ending Futures Contract
When working with perpetual swap, a derivative that mimics a futures contract but never expires. Also known as everlasting futures, it lets traders keep positions open indefinitely as long as they meet margin requirements. In simple terms, a futures contract, an agreement to buy or sell an asset at a set price on a future date normally forces you to settle or roll over before the expiry. A perpetual swap removes that deadline, so the only thing that forces a price convergence is the periodic margin trading, the practice of borrowing funds to amplify a position while posting collateral and the funding rate that swaps hands between long and short sides. This funding rate is calculated from the difference between the perpetual price and the underlying spot price, creating a self‑balancing loop: perpetual swap requires margin trading; margin trading influences funding rates; funding rates keep the swap price close to the spot market. That loop is the core semantic triple that makes the instrument work without an expiry date.
How Cryptocurrency Derivatives and Liquidity Shape Perpetual Swaps
The ecosystem around a perpetual swap is built on cryptocurrency derivatives, financial products that derive their value from underlying digital assets like Bitcoin or Ethereum. These derivatives let you speculate on price moves without owning the asset itself. Because the contracts never settle, exchanges must maintain a deep liquidity pool, a reserve of funds that absorbs large trades and stabilizes prices. The larger the pool, the smaller the slippage, and the more accurate the funding rate becomes. In practice, this means: cryptocurrency derivatives depend on liquidity pools; liquidity pools affect funding rates; funding rates keep perpetual swaps aligned with spot markets. That second triple explains why traders watch the pool size and the open‑interest numbers before opening a leveraged position.
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