A perpetual contract is a type of derivative that allows traders to speculate on the price movements of an asset without an expiration date. Unlike traditional futures contracts, which have specific settlement dates, perpetual contracts can be held indefinitely.These contracts are commonly used in trading cryptocurrencies and feature a mechanism called funding rates. Funding rates ensure that the price of the perpetual contract aligns closely with the underlying asset’s spot price. They involve periodic payments exchanged between traders based on their positions. For example, if the contract’s price is higher than the spot price, long position holders pay short position holders, and vice versa.One of the main advantages of perpetual contracts is the flexibility they offer, allowing traders to leverage their positions. However, this also increases risk, as significant price fluctuations can lead to quick losses. Overall, perpetual contracts are popular for traders looking to capitalize on market movements without the constraints of traditional futures contracts.