What is a Perpetual Contract
The content of this article:
Advantages of USDT-M contracts
Advantages of Coin-M contracts
What is a perpetual contract？
A perpetual contract is an "innovative" futures contract. Traditional contracts have an expiry delivery date, while a perpetual contract has no delivery date and users can hold a position forever. The contract is settled every 8 hours, at 00:00, 8:00, and 16:00 (GMT+8).
XT offers two modes of contract trading：
- USDT-M contracts (forward contracts) support perpetual contracts and are settled in USDT.
- Coin-M contracts (reverse contracts) support perpetual contracts and are settled in cryptocurrencies.
Features of USDT-M contracts
Settle in Dollar-anchored assets: Contracts are priced and settled in USDT.
Clear pricing rules: each contract specifies the number of deliveries of a single contract's underlying asset, also known as "contract units."
Advantages of USDT-M contracts
The USDT-M contracts are linear contracts quoted and settled in USDT. The biggest advantage of settlement in USDT is the ease of calculating returns in fiat. This makes USDT-M contracts more intuitive. For example: 1 USDT is worth approximately $1, so after earning a profit of 500 USDT, you can easily calculate that the profit is about $500.
In addition, the universal settlement currency of USDT can significantly improve transaction flexibility. Multiple futures contracts can use the same settlement currency (eg: BTC, ETH, XRP, etc.) without having to buy the underlying token to fund the contract position. Therefore, there is no need for additional currency exchange when trading through USDT, which saves extra fees.
When the market fluctuates violently, USDT-M contracts can effectively reduce the risk of large price fluctuations. Therefore, there is no need to worry about hedging exposure to the underlying margin of the contract.
Features of Coin-M contracts
Settled in cryptocurrency: contracts are priced and settled in the underlying cryptocurrency, without the need to hold stablecoins as margin.
The Coin-M perpetual contract is a digital asset derivative product. Users can choose to buy long or sell short to obtain benefits from the rise/fall of digital asset prices by judging price change. Similar to a covered asset spot market, where the price is close to the underlying benchmark price, and the main mechanism for anchoring the spot price is the funding fee.
There is no delivery date for perpetual contracts, and users can hold them all the time. The perpetual contract is settled every 8 hours, and the realized profit and loss and unrealized profit and loss will be transferred to the user's account balance after each settlement.
Advantages of Coin-M contracts
Coin-M contracts with cryptocurrencies as the settlement currency can provide an ideal option for miners or holders. Since the contract is settled in the underlying cryptocurrency, the proceeds can be used for long-term capital accumulation.