2. What is perpetual contract? Why is it useful?

Written by the Phezzan team

To put it simply, perpetual contract is a capital efficient way to speculate on the price of a asset with leverage. BitMEX, the inventor of perpetual contract, describes it as "a form of derivative that trades very similar to spot without having the issue of custody". Traders don't actually own the underlying asset, and are instead trading a contract tracking the spot price of the underlying asset but with much more leverage.

Most exchanges offer up to 10-20x leverage. Some extreme exchanges even offer up to 200x leverage. That is, you can trade as if you had $200, even though you only have $1.

When there is a good trading opportunity, trading perpetuals is a capital efficient way to magnify your profit. For this reason, perpetual trading is extremely popular in crypto trading. On 04/22/2022, perpetuals trading constitutes 77% of trading volume on Binance.

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