Eli5DeFi Profile picture
Visual Web3 Research | Telegram Hub ➡️ https://t.co/PMzx57ocEG

Jul 17, 2022, 13 tweets

#GM!
1/ #Perpetuals #futures contract has been the holy grail of derivatives in the #crypto market. We present you our latest #visualguide that breakdown complexity behind future market simplicity with our lead @minnymousegirl

#Cryptocurrency #Bitcoin #ETH #BTC #AVAX #BNB #SOL

2/ A #futures #contract is an agreement to buy or sell a commodity, currency, or another instrument at a predetermined price at a specified time in the future. two counterparties will trade a contract, that defines the settlement at a future date.

3/ A #perpetual contract (Perp) is a special type of futures contract that doesn’t have an expiry date. So one can hold a position for as long as they like. Perp only exists in the #crypto market.

4/ As the perp contract is derivative assets, there is a mechanism in place to ensure that the contract price should be as close as possible to underlying #assets. #Funding rates are the key to this mechanism.

5/ Funding Rates are equal to a thermostat that balance out actual temperature (perpetual contract market) and desired temperature (spot price) by incentivizing non-dominant position in the market to get the funding.

6/ Funding rates positively correlate with the general market trend of the underlying asset. It is not a lead indicator but funding rates help traders to do market bias-check and allow them to look for opportunities for counter-trend trades.

7/ In perp, participants are taking leveraged positions. To ensure collaterals do not get liquidated, a minimum margin must be conserved.

8/ Volume and #open #interest are related concepts. While volume accounts for all contracts that have been traded in a given time period, open interest is the total number of open contract positions held by the market at any given time.

9/ Open interest also correlates with price action and can be confirmation of #bullish / #bearish sentiments

11/ As the #DeFi relies on the #liquidity, perp also relies upon crowdfunding liquidity. The liquidity provider will be incentivized through liquidity mining, revenue sharing, or any other forms of incentives.

12/ The full list of decentralized platforms that focused on #derivatives can be found on @DefiLlama page below:
@llamaintern @0xngmi

defillama.com/protocols/Deri…

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