What is the difference between a delivery contract and a perpetual contract

What is the Difference Between a Delivery Contract and a Perpetual Contract?

In the world of cryptocurrency trading, there are two common types of contracts: delivery contracts and perpetual contracts. While both types of contracts allow traders to speculate on the price of a cryptocurrency, there are some key differences between them.

1. Underlying Asset

• Delivery contracts: Represent the physical delivery of the underlying cryptocurrency on a specified date.
• Perpetual contracts: Do not represent the physical delivery of the underlying cryptocurrency and instead settle in cash.

2. Settlement Date

• Delivery contracts: Have a fixed settlement date on which the underlying cryptocurrency is delivered.
• Perpetual contracts: Do not have a settlement date and can be held indefinitely.

3. Funding Rate

• Delivery contracts: Do not have a funding rate.
• Perpetual contracts: Have a funding rate that is paid periodically to keep the contract price in line with the spot market.

4. Risk

• Delivery contracts: Carry the risk of the underlying cryptocurrency not being delivered on the settlement date.
• Perpetual contracts: Carry the risk of the funding rate fluctuating, which can lead to losses or profits.

5. Suitability

• Delivery contracts: Are suitable for traders who want to take delivery of the underlying cryptocurrency or hedge against the risk of a physical delivery.
• Perpetual contracts: Are suitable for traders who want to speculate on the price of a cryptocurrency without the risk of physical delivery or settlement.

6. Examples

• Delivery contracts: CME Bitcoin Futures, Bakkt Bitcoin Monthly Futures
• Perpetual contracts: Binance Futures, OKX Perpetual Swap, FTX (now bankrupt)