What is Perp
“Future Contract without Expiration Date”
Perp stands for perpetual swap, a crypto futures derivative with no expiration date, invented in 2016 by Arthur Hayes, founder of the derivative crypto exchange Bitmex.
It is mainly like a future contract in traditional finance: traders deposit a margin to trade the futures contract of the underlier, but no expiration date, which means traders can get exposed or speculate (long and short) the underlying assets with leverage and never worry about delivery or storage of the spot. (This is also the fundamental goal of perp)
Three Main Benefits of Perp
Why do traders need perp? Well, there are three main benefits that perp has:
- First, perp can expose traders to an underlying asset without holding it.
- Another one is that perp allows traders to borrow assets they don't have, increasing their capital efficiency. They can trade significant positions with less money (only collateralized margin, usually much less than the position).
- The last one is traders can short an asset easily without the need to borrow&sell the real asset from external sources.
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