Digital currency contracts are a type of financial derivative. They are agreements between two parties to buy or sell a certain amount of digital currency at a specific price on a specific future date. Below is a detailed introduction to it:

Trading Model

- Two-way trading: Investors can buy contracts (go long) when they anticipate the price of digital currency will rise, and they can also sell contracts (go short) when they expect the price to fall. There are profit opportunities regardless of market fluctuations.

- Leverage trading: Contract trading usually offers leverage, allowing investors to control a large number of digital currency contracts with a smaller amount of capital. For example, with a leverage ratio of 10 times, an investor only needs to invest $100 to trade contracts worth $1000. While leverage amplifies profits, it also magnifies risks.

Delivery Method

- Perpetual contracts: There is no fixed delivery date; as long as the contract is not closed or actively closed, it can be held indefinitely. Its price is closely linked to the spot price of the underlying digital currency through a funding rate mechanism.

- Regular contracts: There is a fixed delivery date, such as one week, one month, or several months. On the delivery date, settlement is made based on the agreed contract price and the current market price, completed with cash or the physical delivery of digital currency.

Risk Characteristics

Due to the high volatility of the digital currency market itself and the leverage characteristics of contracts, trading in digital currency contracts carries extremely high risks. A slight price fluctuation can lead to significant losses for investors, potentially resulting in a total loss of principal in a short period. Additionally, contract trading also faces various risk factors such as market manipulation, technical failures, and platform risks.