Perpetual Swaps

Perpetual swaps are another type of contract that acts like a futures contract yet with no expiration.

This type of contract is tied to the spot price of an asset. As spot price deviates from the contract price, a premium funding fee must be paid from the trader on the side of the premium. This encouraged traders to consider opening the opposite position, thus bringing the perp price back to closer to spot price.

This funding aspect can be used as a tool to gauge sentiment and open interest.

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