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What is the difference between a delivery contract and a perpetual contract

Perpetual contracts differ from delivery contracts in that they settle in cash instead of delivering the underlying cryptocurrency on a fixed date.

Oct 25, 2024 at 04:08 pm

What is the Difference Between a Delivery Contract and a Perpetual Contract?

In the world of cryptocurrency trading, there are two common types of contracts: delivery contracts and perpetual contracts. While both types of contracts allow traders to speculate on the price of a cryptocurrency, there are some key differences between them.

1. Underlying Asset

Delivery contracts: Represent the physical delivery of the underlying cryptocurrency on a specified date.
Perpetual contracts: Do not represent the physical delivery of the underlying cryptocurrency and instead settle in cash.

2. Settlement Date

Delivery contracts: Have a fixed settlement date on which the underlying cryptocurrency is delivered.
Perpetual contracts: Do not have a settlement date and can be held indefinitely.

3. Funding Rate

Delivery contracts: Do not have a funding rate.
Perpetual contracts: Have a funding rate that is paid periodically to keep the contract price in line with the spot market.

4. Risk

Delivery contracts: Carry the risk of the underlying cryptocurrency not being delivered on the settlement date.
Perpetual contracts: Carry the risk of the funding rate fluctuating, which can lead to losses or profits.

5. Suitability

Delivery contracts: Are suitable for traders who want to take delivery of the underlying cryptocurrency or hedge against the risk of a physical delivery.
Perpetual contracts: Are suitable for traders who want to speculate on the price of a cryptocurrency without the risk of physical delivery or settlement.

6. Examples

Delivery contracts: CME Bitcoin Futures, Bakkt Bitcoin Monthly Futures
Perpetual contracts: Binance Futures, OKX Perpetual Swap, FTX (now bankrupt)

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