On March 27, Huobi DM announced it entered into the realm of Perpetual Swaps through its well-established Huobi Derivative Market (DM). Derivative trading has become a popular and lucrative way in the cryptocurrency space, and Perpetual Swaps, as a kind of derivative product, is another way for traders to arbitrage better positions.
To understand Perpetual Swaps, it is firstly important to understand futures trading. Essentially, Perpetual Swaps are a form of futures contracts but there is no expiry date on these contracts.
We will delve deeper into how futures trading works below, and we will get into the nuts and bolts of Perpetual Swaps, but we at Huobi would also like to explain why we have launched this product at such a time.
Better Hedge and Arbitrage Opportunities in Volatility
While Bitcoin market space has shown a higher degree of maturity, since the days of its all-time high at the end of December 2017, it recently reminded the community it is still extremely volatile. The price of the coin has managed to drop half its value and recoup almost all of that in a single week in March.
To help understand Perpetual Swaps a little better, we ‘d like to explain why these contracts are a powerful tool in times of high volatility — especially with the mature risk management system that Huobi has in place, such as partial liquidation, liquidation circuit breakers and so on.
In these volatile market conditions, there are risks and opportunities. In allowing our users to hold their positions perpetually (with perpetual swaps), and also more robust hedges in short positions under such bearish conditions in recent times. Arbitrage opportunities also show up in times of volatility, and Perpetual Swaps contracts allow traders to take better advantages there, too.
So, what is a Perpetual Swap Contract?
Perpetual Swaps fall under the umbrella of futures contracts, which in essence, perpetual swaps are never-expi...