Do you know the principle of perpetual contracts?

The underlying logic of perpetual contracts is: allowing investors to borrow virtual currency to buy or sell virtual currency at a specific price at a specific time in the future.

For example, Little Fish has 100 USDT, and Little Fish believes that the price of Bitcoin will rise from 100 to 200 tomorrow. At this point, Little Fish can borrow 900 USDT from the exchange, then use this 1000 USDT to buy 10 bitcoins, and sell them when the price rises to 200 tomorrow. After selling, Little Fish's account will have 2000 USDT, and after repaying the 900 USDT borrowed from the exchange, Little Fish's profit from this transaction will be 1000 USDT.

If Little Fish only used the original 100 USDT principal to trade, then the profit would only be 100 USDT. So in this example, Little Fish used 10 times leverage, earning 10 times the profit by going long on Bitcoin.

However, if Little Fish predicts the price direction incorrectly and the price of Bitcoin drops to 50 the next day, then the 10 BTC in Little Fish's hand would only be worth 500 USDT, resulting in a notional loss of 500 USDT. Therefore, trading perpetual contracts can amplify both gains and losses when using leverage.

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