This paper will comprehensively analyze the bitcoin contract and its operation mode, and discuss why people trade and how to get started.
The foundation of bitcoin contract
A bitcoin contract refers to a contract that can be traded without actually owning bitcoin. It is quite different from the currency transactions that can only be conducted if you actually hold digital currency.
Bitcoin contracts enable you to predict the price trend of Bitcoin and hedge risks. This way of trading means that you invest in price trends, not the assets themselves.
When trading bitcoin contracts, you can decide whether to be short or long. Choosing to do more means that you expect bitcoin prices to rise. On the other hand, shorting shows that you expect the price to fall.
Leveraged trading
You can choose high leverage trading, which is a feature of bitcoin contracts. Using leverage means that you don't have to invest 100% of the transaction amount when trading a contract. On the contrary, you only need to deposit the initial deposit, which only accounts for a small part of the total contract price.
Leveraged trading allows you to manage risk while taking a large amount of exposure with a small amount of money.
Permanent contract
Although there are many different types of contracts, this paper mainly focuses on permanent contracts. As the name implies, these contracts have no expiration date. Traders who use permanent contracts to make long or short positions can hold positions indefinitely, unless the contracts explode, which means that they will not suffer more losses than the initial margin.
In a permanent contract, the pricing of bitcoin is based on a specific index price. The index price is based on the average price of Bitcoin in multiple currency trading markets.
Bitcoin contracts have become a very popular trading tool. Many traditional investors are not prepared to allocate funds to digital assets, but they still hope to benefit from attractive price fluctuations, and contract transactions have opened the door for them.