What Are Perpetual Contracts and How Funding Rates Work | dYdX Academy

dYdX Academy explains the advantages of perpetual contracts over spot markets and how funding rates keep a perpetual contract's price in line with the underlying asset. Contents: 0:00 Introduction 0:09 Perpetual Trading vs Spot Trading 1:27 Advantages of Perpetual Trading 2:42 Understanding Funding Rates 3:54 Funding Rates on dYdX 4:32 Key Takeaways Glossary: Spot trading: Purchasing an asset directly from a spot market Perpetuals: Synthetic trading markets that allow for exposure to arbitrary liquid assets using stablecoin (USDC) collateral. Perpetual contracts are inspired by traditional futures contracts, but differ in that there is no expiry date and therefore no final settlement or delivery. Funding Rate: Rate of payments exchanged between long and short traders to encourage the price of a perpetual contract to trade close to the price of the underlying asset. Links: dYdX Documentation on Funding Rates - https://help.dydx.exchange/en/article.... Disclaimer: All content is for educational purposes and does not constitute investment advice. dYdX Academy is a dYdX Grant initiative and does not represent dYdX Trading or dYdX Foundation.