What are perpetual contracts on Bybit? An easy explanation.

What Are Perpetual Contracts?

1. Perpetual contracts are derivative instruments that track the price of an underlying asset—such as Bitcoin or Ethereum—without an expiration date.

2. Unlike traditional futures, they do not settle at a fixed time; traders can hold positions indefinitely as long as margin requirements are met.

3. These contracts use a funding mechanism to anchor their price close to the spot market, preventing prolonged deviations.

4. Bybit’s perpetuals operate on a linear settlement model, meaning profits and losses are calculated and settled in the same cryptocurrency as the base asset.

5. Each contract is standardized—for example, BTC/USDT perpetual has a contract size of 1 USD worth of Bitcoin, enabling precise exposure management.

Funding Rate Mechanics

1. The funding rate is exchanged between long and short traders every 8 hours, based on the difference between the perpetual contract price and the index price.

2. When the funding rate is positive, longs pay shorts; when negative, shorts pay longs.

3. Bybit calculates the funding rate using the premium index, which incorporates order book depth and recent trade prices to reduce manipulation risk.

4. Funding is applied automatically to users’ wallet balances and impacts open position equity in real time.

5. Traders can view current and historical funding rates directly on Bybit’s trading interface or via API feeds.

Leverage and Margin Models

1. Bybit offers isolated and cross margin modes, giving users control over how collateral is allocated across positions.

2. Isolated margin restricts risk to the amount assigned to a single position, while cross margin uses the entire wallet balance to prevent liquidation.

3. Leverage ranges from 1x to 100x depending on the asset and contract type, with higher leverage available for major pairs like BTC/USDT.

4. Initial margin and maintenance margin thresholds are dynamically adjusted based on position size and market volatility.

5. Liquidation occurs when equity falls below the maintenance margin level, triggering an auto-deleveraging process if necessary.

Trading Interface Features

1. Bybit’s unified trading terminal supports charting tools, order book depth visualization, and real-time trade history.

2. Users can place limit, market, stop-market, stop-limit, and trailing stop orders with customizable trigger conditions.

3. The platform displays real-time PnL, unrealized profit and loss, entry price, and liquidation price for each open position.

4. Advanced settings allow traders to toggle between contract value display modes: base currency, quote currency, or USD equivalent.

5. Mobile and desktop interfaces sync seamlessly, preserving order status, position data, and notification preferences.

Common Questions and Answers

Q: Can I trade perpetual contracts without holding the underlying coin?A: Yes. Bybit’s linear perpetual contracts are settled in USDT or the quote currency, so no BTC or ETH ownership is required to open or close positions.

Q: How does Bybit prevent price manipulation during funding calculation?A: Bybit uses a composite index price derived from multiple top-tier spot exchanges, weighted by volume and filtered for outliers to ensure robustness.

Q: What happens if my position gets liquidated?A: Your position is closed automatically at the bankruptcy price, and any remaining margin is forfeited after fees and insurance fund deductions.

Q: Is there a minimum trade size on Bybit perpetuals?A: Yes. Minimum order size varies by symbol—for BTC/USDT it is 10 USDT worth of contracts, enforced at the order submission layer.