Perpetual trading in crypto refers to trading perpetual futures contracts or swap contracts. These financial instruments are commonly used in the cryptocurrency market and are available through Mirakle DEX on Fuse.
Perpetual futures contracts are a derivative product that allows traders to speculate on the price movement of cryptocurrencies without owning the underlying assets. Unlike traditional futures contracts that have expiration dates, perpetual futures contracts do not expire. They are designed to track the price of the underlying cryptocurrency closely.
Critical features of perpetual futures contracts include the ability to trade with leverage, which allows traders to amplify their positions, and the presence of a funding rate mechanism. The funding rate ensures the contract’s price stays close to the cryptocurrency’s spot price.
Perpetual swap contracts, often called perpetual or perpetual swap contracts, are similar to perpetual futures contracts. They also enable traders to speculate on cryptocurrency price movements without owning the assets. These contracts are traded on Fuse through Mirakle DEX and offer liquidity and flexibility to traders in the Fuse ecosystem.
Imagine a trader who wants to speculate on the price of Bitcoin using a Bitcoin perpetual futures contract on a platform like Mirakle. They would go through the following steps:
Account Setup: The trader connects to a decentralized cryptocurrency exchange like Mirakle that offers Bitcoin perpetual futures trading. They complete the necessary verifications and deposit funds into their trading account.
Market Analysis: Before placing a trade, the trader conducts market analysis. They believe that the price of Bitcoin will rise in the short term based on technical analysis and recent news.
Position Opening: With this bullish outlook, the trader decides to go long on Bitcoin perpetual futures. They use 5x leverage, which means they can control a position size five times larger than their initial capital.
Margin Requirement: The exchange requires a 5% margin for this trade. So, if the trader wants to enter a position worth $10,000 worth of Bitcoin, they only need to deposit $500 as a margin.
Funding Period: Bitcoin perpetual futures contracts often have funding periods (e.g., every eight hours) where traders either receive or pay funding fees depending on their positions. These fees help keep the contract’s price aligned with the spot market.
Monitoring: The trader closely monitors the trade as Bitcoin’s price fluctuates. If the price rises as anticipated, they can profit from the leveraged position.
Exit Strategy: When the trader decides to close the position, they execute an opposing trade (going short) to liquidate their position. The profit or loss is realized based on the price difference between entry and exit.
Funding Fees: Depending on the exchange and the contract’s funding mechanism, the trader may receive or pay funding fees during the funding period.
This example illustrates how a trader can engage in perpetual trading in crypto by using leverage to amplify their exposure to the underlying asset (Bitcoin, in this case) and profit from price movements. It’s important to note that while leverage can amplify gains, it also increases the risk of significant losses, so risk management is crucial in perpetual trading.
Perpetual Trading on Fuse Network
Perpetual trading is available on Fuse Network through the recently integrated Mirakle DEX. The decentralized spot and perpetual exchange is already running on Fuse and support low swap fees and zero price impact trades. Trading is improved by a unique multi-asset pool that earns liquidity providers fees from market making, swap, and leverage trading with dynamic pricing supported by SupraOracles.
Furthermore, Fuse’s leading DEX, Voltage Finance, is about to witness the launch of its new launchpad, and the Mirakle decentralized exchange (DEX) will be the first project to launch an IDO.
Perpetual Crypto Trading in Summary
In summary, perpetual trading in crypto involves using perpetual futures contracts or perpetual swap contracts, which provide traders with opportunities to profit from cryptocurrency price fluctuations, manage risk, and employ leverage strategies.
Practicing risk management is crucial, as trading perpetual contracts can be highly volatile and result in substantial losses. Beginners should start with small positions and gradually increase their trading size as they gain experience. Additionally, educate yourself thoroughly before engaging in perpetual trading to understand the mechanics and risks involved.