Perpetual and Inverse Swaps: Expiry, Funding, and Collateral
Summary
The document introduces cryptocurrency perpetual swaps as derivatives that let traders take long or short exposure without a contract expiration. Unlike dated futures, perpetuals do not naturally converge with spot through settlement, so exchanges use periodic funding payments to encourage positioning that helps keep contract prices anchored to the underlying market. The article describes funding as a balancing mechanism, though it does not explain how rates are calculated or quantify their trading costs.
It distinguishes inverse perpetuals by their use of cryptocurrency as the base or collateral currency, allowing traders to maintain exposure without first converting holdings into a stablecoin. It also mentions a product with collateral shared across crypto assets. The overview gives historical context for the concept and its adoption in crypto markets, but provides no pricing formulas, risk analysis, or performance evidence. Traders would need further information to assess funding exposure, collateral valuation, and liquidation risks.
Key ideas
- Perpetual swaps provide long or short exposure without an expiration date.
- Funding payments help keep perpetual contract prices connected to spot prices.
- Inverse contracts use crypto assets as the base currency or collateral.
- The document introduces product structures but does not quantify funding costs or liquidation risks.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.