Difference Between Perpetual Contracts and Traditional Contracts on BitTap

2 min readOct 24, 2024

What is a Perpetual Contract?
A perpetual contract is a type of derivative contract with no expiration date. Users can hold positions indefinitely until they decide to close them, without worrying about an expiration or settlement date. Perpetual contracts use a funding rate mechanism to keep the contract price close to the spot market price.

What is a Traditional Contract?
A traditional contract has a fixed expiration date. When the contract reaches its expiration, all open positions are automatically settled. Settlement can be either in cash or physical delivery, depending on the nature of the contract.

Key Differences

1. Expiration Date

Perpetual Contract: No expiration date. Users can hold their positions indefinitely.
Traditional Contract: Has a specified expiration date. The contract is automatically settled upon expiration.

2. Funding Rate

Perpetual Contract: Uses a funding rate to maintain the contract price in line with the spot market. This rate is periodically settled between long and short positions.
Traditional Contract: No funding rate. The price fluctuates solely based on supply and demand in the market.

3. Price Tracking Mechanism

Perpetual Contract: The price is kept in line with the spot market through the funding rate.
Traditional Contract: The price may deviate from the spot price as the contract approaches expiration, influenced by market expectations.

4. Leverage and Risk

Perpetual Contract: Offers higher leverage options, with BitTap providing up to 200x leverage. This makes it suitable for short-term trading with higher risk.
Traditional Contract: Leverage is generally lower, making it more appropriate for medium- to long-term investment strategies.

5. Settlement Method

Perpetual Contract: No expiration, so no physical delivery. All transactions are settled in cash.
Traditional Contract: Upon expiration, the contract is settled, which can involve either cash settlement or physical delivery, depending on the contract terms.

By understanding these key differences, users can decide which type of contract better suits their trading strategies on BitTap.

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