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What is a Perpetual Contract?

A perpetual contract is a type of derivative product that resembles leveraged spot trading. It is typically settled in cryptocurrencies such as BTC, USDT, and others. Traders can go long to profit from price increases or go short to benefit from price declines.

Unlike traditional futures contracts, perpetual contracts do not have an expiry date, meaning traders can hold their positions indefinitely. To ensure the contract price closely follows the price of the underlying asset, a funding fee mechanism is used to maintain price alignment with the spot market.

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Key Market Mechanisms of Perpetual Contracts

When participating in perpetual contract trading, it’s important to understand several key mechanisms that govern how these instruments function:

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1. Mark Price Mechanism

Perpetual contracts use a fair price marking system. The mark price is used to calculate:

  • Unrealized profits and losses (PnL)

  • Liquidation price of the position

This system helps protect users from forced liquidations caused by short-term market volatility or price manipulation.

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2. Initial Margin & Maintenance Margin

These two margin levels are critical to risk management and leverage:

  • Initial Margin: The minimum amount of collateral required to open a position. It determines the maximum leverage you can use.

  • Maintenance Margin: The minimum margin required to keep a position open. Falling below this threshold will trigger forced liquidation.

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3. Funding Fees

Funding fees are exchanged every 8 hours between traders holding long and short positions to maintain price alignment with the spot market.

  • If the funding rate is positive, long positions pay the fee and short positions receive it.

  • If the funding rate is negative, the reverse applies.

  • Funding fees are only paid or received if the position is held at the funding timestamp.

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4. Funding Fee Timestamps

Funding is exchanged three times per day at the following (UTC+8) times:

  • 08:00

  • 16:00

  • 24:00

You can view the current funding rate in two locations:

  • Under “Contract Details” at the bottom left of the trading interface

  • Within your personal “Contract Details” section

Historical funding rates can be reviewed in the Funding Rate History.

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