What are the similarities and differences between perpetual and delivery?

Hotcoin provides contract services through two major products: perpetual contracts and delivery. The main differences between the two products are as follows:

1. Delivery time

Delivery contracts allow traders to buy or sell an asset at a predetermined price before a specified time limit. In other words, the delivery contract has a time limit and will be delivered according to the corresponding time period. For example: Our BTC 0925 is a quarterly contract that expires 3 months from the issuance date.
On the other hand, as the name suggests, perpetual contracts have no expiration date. Therefore, unlike delivery contracts, traders do not need to track individual delivery months. For example: traders can hold positions permanently as long as they are not forced to liquidate.

2. Funding rate

Perpetual contracts are not settled in traditional ways, and the trading platform needs to establish a mechanism to ensure that the contract price regularly converges to the index price. This mechanism is called funding rate/funding fee.
Funding fees are fees paid periodically to long or short traders based on the difference between the perpetual contract market and the spot price. Traders will be the payer or payee of funds depending on the size of their open positions.
Unlike perpetual contracts, there are no funding fees for delivery contracts. This benefits long-term traders and hedgers, as funding fees fluctuate over time. Particularly during extreme market conditions, high funding fees can make maintaining long-term positions in the market prohibitively expensive.
For example: when the price of BTC rebounds, funding fees across the Bitcoin perpetual contract market may spike, indicating uneven buying pressure in the market. Over time, this will result in a significant increase in the cost of holding the long position.