Perpetual Swap

Also called Perpetual Futures, a derivative contract allowing traders to speculate on digital asset prices without an expiration date.

What is Perpetual Swap?

A perpetual swap is a type of futures contract traded on Perp DEXs that enables users to bet on the price movement of digital assets like Bitcoin or Ethereum without a fixed expiry date, unlike traditional futures. These contracts mimic spot trading but allow for leverage, meaning traders can control larger positions with less capital. Settlement occurs in real-time based on the difference between the entry price and the current market price, often using stablecoins like USDC for payments.

Perp DEXs like dYdX and GMX facilitate perpetual swaps via smart contracts, ensuring trustless and non-custodial trading. The absence of an expiration date makes perpetuals appealing for long-term speculation or hedging, but they require mechanisms like funding rates to balance long and short positions and prevent market skew. Traders must manage risks like liquidation due to price volatility and margin requirements.