In fact, we have basically understood the main difference between the two. Futures contracts have an expiration date, while perpetual contracts do not. But how are they different? Some futures contracts will automatically "roll over" to the next contract when they expire. This means that when the current contract expires, the open contract will actually be transferred to the next contract cycle. In fact, this is basically equivalent to how perpetual contracts work, which are not based on a quarterly cycle. However, this is not the case with Binance futures contracts. When the expiration date comes, the futures contract will be delivered at the average price of the last hour and settled in BTC as the instrument.
In contrast to perpetual contracts, the price index of futures contracts is based on the BTC/USD market, not the BTC/USDT market. This allows traders to hedge the risk of the USD and USDT exchange rate decoupling.
At the same time, the index price is composed of the moving average of the BTC/USD market prices on the following exchanges: Bitstamp, Coinbase Pro, Kraken, Bittrex and Binance. These markets are equally weighted in the index. The index is used to calculate the actual price of liquidation. Not sure what the tick is? Check out the chapter on that in our futures guide.
Another major difference is the fees you have to pay. If you are trading a perpetual contract, you must pay a funding fee every 8 hours. This funding payment is made between market participants to keep the perpetual contract market price close to the spot price. You might think of it as similar to an interest rate, but it is paid between traders.
When funding is positive, long positions pay short positions, and when funding is negative, short positions pay long positions. However, there are no funding fees associated with futures contracts. This also makes them ideal for long-term holdings, as the funding fee and position do not gradually decrease over time. At the same time, if you are looking to trade short-term, perpetual contracts may be more suitable for you. It all depends on your risk tolerance and trading style.
