TL;DR Summary

• Perpetual trading in crypto allows you to speculate on asset prices without owning them.
  
  
• Perpetual swaps, the core instrument, have no expiry date, mimicking the asset's price continuously.
  
  
• Funding rates balance prices in perpetual swaps.
  
  
• Leverage in perpetual trading enables controlling larger positions but comes with added risk.
  
  
• NFT perpetual swaps combine NFT uniqueness with perpetual swaps, offering reduced friction, increased leverage, and flexible sizing.
  
  
• Choose a platform like NFTFN to enter the world of NFT perpetual trading.
  
  
• Select an NFT, enter a perpetual swap contract (long or short), and profit when closing the contract.
  
  
• Perpetual contracts in crypto are popular due to 24/7 trading, liquidity, high leverage, hedging, and speculative opportunities.
  
  
• They don't require physical ownership of assets, making them accessible to a broader audience.
  
  
• Whether you're new or experienced, understanding perpetual trading's mechanics is crucial for confident crypto market navigation. Start small, practice, and keep learning. Happy trading!

Introduction

In the thrilling realm of cryptocurrency and Web 3, there's always something new and exciting around the corner. Today, we're going to explore the landscape of Perpetual Trading in Crypto, a topic that's been making waves in the crypto community. And also get a sneak peek into NFT Perpetuals as well. What is it? How does it work? Why is it gaining so much attention? We'll answer all these questions and more, giving you a comprehensive understanding of this trading phenomenon.

So, fasten your seatbelts and get ready to embark on a journey into the world of Perpetual Trading.

Perp Trading Unveiled

Before we dive into the deep waters of Perpetual Trading, let's start with the basics:

What is Perp Trading?

Perp trading is short for "Perpetual Trading," a type of trading in the cryptocurrency market that offers unique opportunities for both seasoned traders and newcomers. 

Unlike traditional spot trading, where you buy and hold an asset, perpetual trading allows you to speculate on the cryptocurrency's price without actually owning it. In simpler terms, you're betting on whether the price will go up or down without having to buy and hold the underlying asset.

But how does it work? Let’s break that down.

The Perpetual Swap

A perpetual swap is the core instrument of Perp trading. It's a contract between two parties - the buyer and the seller. 

Unlike traditional futures contracts that have expiration dates, perpetual swaps don't expire. They are designed to mimic the price of the underlying asset, allowing traders to speculate on its future value.

Here are the Key Features of a Perpetual Swap:

• No Expiry Date: As mentioned earlier, perpetual swaps don't have an expiration date, which makes them unique in the world of trading. Think of perpetual swaps like your smartphone data plan. With a regular data plan, you might run out of data at the end of each month, and you have to renew it. But with some unlimited data plans, there's no need to worry about expiration dates. You can use your data as much as you want, whenever you want, without  ever having to renew it. It's a continuous service with no time limits.
  Similarly, perpetual swaps have no set expiration date, so you can keep your position open as long as you like, without the pressure of a deadline.
  

• Funding Rates: To keep the price of the perpetual swap in line with the spot market, funding rates are applied periodically. If the perpetual swap is trading above the spot price, long positions pay short positions, and vice versa.
  
  Think of funding rates like a friendly tip jar at your favorite local coffee shop. If the coffee shop is having a great day with lots of customers, they put some of their extra earnings in the tip jar. But on slower days, the employees may take a little from the tip jar to make sure they still earn a fair wage. It's a way to balance out the income, so everyone gets a fair share.
  
  In crypto, funding rates help keep the perpetual swap price in line with the real market price, ensuring a fair deal for both buyers and sellers.
  
  
• Leverage: Perpetual swaps typically offer leverage, enabling traders to amplify their positions. However, this also increases the risk involved.
  
  Imagine you want to buy a house, but you don't have the full price upfront. You decide to take a mortgage, which is a form of leverage. You put down a fraction of the house's price (your down payment) and borrow the rest from the bank. While this allows you to own a valuable asset, it also means you have to repay the loan with interest. Leverage in crypto trading works similarly – it enables you to control a more valuable position with a smaller amount of your own capital, but it comes with added  risks and potential interest costs.
  

The Perpetual Swap Contract

A perpetual swap contract in crypto is a financial derivative that derives its value from an underlying cryptocurrency, such as Bitcoin or Ethereum. 

These contracts are ideal for traders who want to profit from the price movements of cryptocurrencies without owning them.

Here's how a perpetual swap contract works:

• You enter into a contract to buy or sell a certain amount of cryptocurrency at the current market price.
  
  
• Your profit or loss is determined by the difference between the contract price and the market price at the time of liquidation.
  
  
• The contract remains open until you decide to close it or it gets liquidated due to unfavorable market conditions.

Note: Here, liquidation is a critical concept. It's the point at which the contract is closed to prevent further losses when the price of the underlying asset moves against the trader beyond a certain threshold.

The purpose of liquidation is to ensure that traders don't accumulate massive losses that they can't cover. It helps maintain the integrity of the contract and ensures that there are sufficient funds to pay out to the winning side.

Let’s understand this with an example.

A perpetual swap contract in crypto is like a bet you make with a friend on a sports game.

Here's how it works:

• You both agree to the terms of the bet. Let's say you believe the price of 1 Bitcoin will go up from its current price of $40,000, while your friend thinks it will go down.

• You decide to enter into a contract with your friend, specifying the terms of your bet. You're betting 1 Bitcoin, and your friend is betting 1 Bitcoin as well. This is like setting the stakes for your bet.

• As the price of Bitcoin fluctuates in the real crypto market, the value of your bet changes accordingly. If the price goes up, you win; if it goes down, your friend wins.

• The unique thing about this contract is that it has no set expiration date. It's like watching an ongoing sports game that never ends. You can keep your bet open as long as you want, without worrying about the game's final whistle.

• When one of you decides to end the bet, you calculate the difference between the initial contract terms and the current market price of Bitcoin. If the price has gone up, you receive the profit; if it has gone down, your friend gets the winnings.

• If the crypto market suddenly takes a wild turn and moves drastically against one of you, the contract can get automatically closed to limit potential losses. This is similar to a referee ending a sports game if one team is too far ahead.

NFT Perpetual Swaps: A New Frontier

As the crypto world continues to evolve, we're witnessing the emergence of new and exciting trading opportunities. One such innovation is NFT perpetual swaps.

What are NFT Perpetual Swaps?

NFT perpetual swaps combine the concepts of Non-Fungible Tokens (NFTs) and perpetual swaps. 

NFTs are unique digital assets that represent ownership of a particular item, whether it's digital art, collectibles, or virtual real estate. These assets are unique, indivisible, and cannot be exchanged for an equivalent. 

Once an NFT is created or "minted," its code is permanently woven into the blockchain and it can be traded on a marketplace with a cryptocurrency like Ethereum, Solana, and so on.

For a complete breakdown of NFTs and their history, check out for Twitter Thread.

Now, imagine applying this uniqueness to perpetual swaps. NFT perpetual swaps allow traders to speculate on the future price of a specific NFT, such as BAYC (Bored Ape Yacht Club) or MoonBirds. The best part? Traders don’t need to own the NFTs to speculate on them. 

This opens up a whole new world of trading possibilities. Let’s get into It.

The Case for NFT Perpetual Swaps

NFT perpetual swaps offer a superior NFT trading experience, focusing on reduced friction, increased leverage, and flexible sizing. 

1. Reduced Friction:

Traditional NFT trading often involves purchasing assets from marketplaces, and incurring transaction costs and royalties. 

With NFT perpetual platforms, there's no need to handle underlying NFTs. This streamlines the process, making it more cost-effective and capital-efficient, particularly on Layer 2 networks (Polygon, Arbitrum, etc) with lower fees.

2. Increased Leverage:

Previously, traders had limited options for obtaining leverage – using spot assets on traditional exchanges or borrowing against their NFT holdings on specific platforms. 

NFT perpetual platforms simplify this process by accepting collateral in various currencies and providing a direct environment for utilizing borrowed funds. 

For instance, you can open an NFT position using ETH as collateral and settle in ETH when you exit the trade.

3. Flexible Sizing:

NFT perpetual swaps allow traders of all sizes to gain exposure to any NFT collection. 

Whether you're trading a small fraction or a significant multiple of a particular NFT's value, like a Bored Ape, these platforms accommodate your needs. 

This not only empowers small investors to access NFT markets they might have otherwise missed but also enables larger players to trade significant positions without causing drastic price shifts in the spot market. It's a win-win for traders of all sizes.

How does NFT Perpetual Trading Work?

As we’ve already seen, NFT perpetual trading is a fusion of NFTs and perpetual swaps, where traders speculate on the future price of NFTs without owning them. Here's how it works:

1. Choose a Platform‍

To kickstart your NFT perpetual trading journey, you'll need to select a platform that offers NFT perpetual trading. 

This platform acts as your gateway to this exciting trading world, providing the necessary tools and infrastructure.

But to make it more concrete, let's introduce NFTFN as an example. 

NFTFN is a pioneering web3 fintech platform dedicated to building innovative financial products on top of Blue-Chip NFTs, starting with the flagship product – "SuperNova (SNV)." 

With SuperNova, traders can go long (bet on price increase) and short (bet on price decrease) on a variety of blue-chip NFTs like Bored Ape Yacht Club (BAYC), Meebits (MAYC), Azuki, and more.

2. Choose an NFT

‍Once you've chosen a platform like NFTFN, you can then select an NFT or an NFT Index that is available to speculate on. 

3. Trading and Profit:

With the right platform and NFT at your side, you're ready to dive into the action. 

Here's how the trading process works:

• Enter into a perpetual swap contract based on your chosen NFT. You can opt for a "long" position if you believe the NFT's price will rise or go "short" if you anticipate a price drop.

• As the market moves and the NFT's value fluctuates, your contract's value will change accordingly. 

• When you decide it's time to close the contract, your profit or loss will be determined by the difference between the contract's opening and closing prices.

Let’s understand with an example: 

You believe that the value of the BAYC NFT collection is going to rise in the near future. So, you enter into a long perpetual swap contract (position) on a platform strike price of 100 ETH. 

This means that you are betting that the price of BAYC will rise above 100 ETH in the future.

If you are correct, and the price of BAYC rises to 120 ETH, your contract will be worth 20 ETH. You can then close your position and take your 20 ETH profit.

The Popularity of Perpetual Contracts in Crypto

Perpetual contracts have gained immense popularity and for good reason. Let's explore why they've become a favorite among traders.

1. 24/7 Trading: Unlike traditional markets that have set trading hours, crypto markets operate 24/7. Perpetual contracts enable traders to take advantage of price movements at any time.

2. Liquidity: Crypto markets can be highly liquid, and perpetual contracts benefit from this liquidity. Traders can enter and exit positions quickly.

3. Leverage: Perpetual contracts often offer high leverage, allowing traders to amplify their positions and potentially increase their profits.

4. Hedging: Traders can use perpetual contracts to hedge their exposure to cryptocurrencies & NFTs, reducing the risks associated with price fluctuations.

5. Speculation: With perpetual contracts, traders can speculate on both rising and falling markets, opening up various trading opportunities.

6. No Need for Physical Ownership: You don't need to own the underlying asset to trade perpetual contracts, making it accessible to a broader audience.

Conclusion

Perpetual Trading in Crypto, including NFT perpetual swaps, has added an exciting dimension to the world of cryptocurrency trading. It offers flexibility, 24/7 access, and the potential for profit, but it also comes with risks that need to be managed effectively.

Whether you're a seasoned trader looking to diversify your portfolio or a newcomer eager to explore the crypto market, understanding the mechanics of perpetual trading is crucial. Start small, practice, and always keep learning. By doing so, you can navigate the thrilling world of perpetual trading with confidence and make informed decisions to achieve your financial goals. Happy trading!

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