Today marks a massive milestone for the EMX team. We launched two exciting new products on EMX mainnet: the BTC perpetual contract and the US500 Equity Index perpetual contract.
With the introduction of the US500 Equity Index perpetual, you can now go long or short the 500 top U.S. stocks using Bitcoin as collateral. Until now, derivatives exchanges in the crypto ecosystem have solely been focused on Bitcoin and altcoin products, but we are aiming to disrupt the entire ecosystem with our unique product offerings.
What is a Perpetual Contract?
A perpetual swap contract is a futures contract with no expiry or settlement. This means you will be able to trade the contract in perpetuity, as long as you don’t get liquidated.
Like futures contracts, perpetuals allow traders to speculate on the price of an asset, for example Bitcoin. You can long or short a position with leverage, to profit from the rise or decline of an asset’s price. On EMX, the BTC and US500 perpetuals offer up to 20X leverage.
Perpetuals trade closely to the underlying index price. Futures contracts, on the other hand, can trade at significantly different prices due to basis.
Perpetuals are ideal for day traders as they make it very easy to quickly trade in and out of both long and short positions, and also allow for high leverage.
In order to keep the perpetual contract price close to the underlying index price, a “funding rate” is used. The funding rate forces one side of the market to pay the other side if the price of the contract strays from the index. This is done to keep the marketplace as equal as possible.
If the perpetual trades higher than the index, long positions (bulls) will pay short positions (bears) at a rate determined by the amount of variance between the index and the current price of the contract. This funding rate makes the product less appealing to longs, and more appealing to shorts, thus it eventually pushes the perpetual price back down to the level of the index. If the perpetual trades lower than the index, shorts pay longs.
On EMX, funding for both the BTC and US500 contracts is paid every 8 hours to only those holding positions at 04:00, 12:00, 20:00 UTC. Funding is paid on the USD notional value (calculated using Mark Price) of the position.
For more about the EMX perpetuals and their specifications, click here.
Trading a perpetual can be extremely beneficial for a trader, as it offers convenience and flexibility due to the lack of an expiry.
We also plan to add perpetual swaps for popular altcoins and other traditional commodities and equity indices in the near future, so stay tuned for those.