Understanding Bybit Perpetual Futures and Inverse Contracts

Bybit Perpetual Futures and Inverse Contracts are designed to allow traders to speculate on the price of an underlying asset without actually owning it.

Bybit's Perpetual Futures contracts have a unique feature where they don't expire, allowing traders to hold positions indefinitely.

Inverse Contracts on Bybit are designed to move in the opposite direction of the underlying asset, providing a way for traders to profit from price drops.

Bybit's Perpetual Futures contracts also have a built-in funding mechanism, which is a periodic payment made to long positions and received by short positions.

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Perpetuals are agreements to buy or sell assets with no expiration date, essentially futures with no end.

They trade very close to spot prices, with most of the action happening in the perpetuals space.

Perpetuals allow traders to use leverage, which is a key reason why they're used.

Bybit offers perpetuals on hundreds of crypto assets, settled in USDC, USDT, or the underlying crypto.

The mark price is used to trigger liquidations and is derived from the index price plus the funding rate.

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Futures are agreements to buy or sell a particular asset, like Bitcoin, at a pre-determined price, known as the contract price, on a specific future date, called the expiration date. This contract must close by the expiration date, but buyers and sellers can sell their contracts to others at any time before then.

The buyer, Alice, and seller, Bob, in our example, are betting on the future price of Bitcoin. Alice thinks it will go up, while Bob thinks it will go down. If Bitcoin's price at expiration is higher than the contract price, Alice profits, and if it's lower, she loses. The opposite is true for Bob.

Let's look at the possible outcomes:

In the example from Bybit, the current market price for a Bitcoin futures contract is $62,990, while Bitcoin's market price is $60,882. This means buyers are betting Bitcoin will be trading higher than $62,990 by the expiration date, while sellers are betting it will be lower.

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Perpetuals are agreements to buy or sell assets for a particular price with no expiration date, similar to futures but without a time limit.

Perpetuals are essentially futures contracts that can be closed at any time, but the trader's profit or loss depends on the contract's profitability when it's closed.

Most of the action in crypto derivatives happens in the perpetuals space, where contract prices trade very close to spot prices.

Perpetuals are used by traders to take advantage of leverage, which allows them to control larger positions with a smaller amount of capital.

Bybit offers perpetuals on hundreds of crypto assets, settled in USDC, USDT, or in the underlying crypto, known as inverse perpetuals.

The mark price is used to trigger liquidations and is derived from the index price plus the funding rate, which is a market dynamic that keeps the mark price close to the index price.

Perpetual contract prices generally stay very close to the index price, which is the underlying price of the asset.

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The funding rate is a crucial aspect of Bybit perpetual futures, and it's essential to understand how it works. This rate is used to calculate the funding fee, which is exchanged between longs and shorts every 8 hours.

A positive funding rate means longs pay shorts, while a negative rate means shorts pay longs. The funding rate is a gauge of bullish or bearish sentiment for the spot price of the asset.

The funding fee is calculated by multiplying the dollar value of your position by the funding rate. For example, if you're long on bitcoin with a position value of $61,471 and the funding rate is 0.01%, you'll pay the shorts $6.14.

Here's a summary of the funding fee conditions:

The funding fee can eat into your profits or magnify your losses, especially if you're keeping your contract open for extended periods of time. So, it's essential to keep an eye on this.

Funding fees are a crucial aspect of trading on Bybit, and it's essential to understand how they work. They're used to keep the contract price relatively pegged to the index price.

The funding fee is calculated by multiplying the dollar value of your position by the funding rate. For example, if your position value is $61,471 and the funding rate is 0.01%, you'll pay $6.14 to the shorts at the end of the eight-hour period.

Bybit charges funding fees to maintain perpetual contracts, which never expire. If perpetual contracts cost more than the index price, longs pay shorts, and if they cost less, shorts pay longs.

The funding rate is a gauge of bullish or bearish sentiment for the spot price of the particular asset. A positive funding rate occurs when the contract price is above the spot price, and a negative rate happens in the opposite situation.

Here's a breakdown of the funding fees for different products on Bybit:

Note that the funding fee rate is the same for both perpetual and inverse contracts on Bybit. It's a regular fee charged or paid twice a day, where long position holders need to pay a 0.01% funding rate to short position holders.

To accurately calculate your profit and loss (P&L) on Bybit, you need to consider the Average Entry Price (AEP). This is calculated by dividing the total contract value by the total contract quantity. For example, if you have 1,000 contracts at $5,000 and add 2,000 more at $6,000, your AEP would be $5,625.

The unrealized P&L is calculated by multiplying the contract quantity by the difference between the inverse of the last traded price and the inverse of the AEP. If you're in a short position, you multiply the contract quantity by the difference between the inverse of the last traded price and the inverse of the AEP.

The unrealized P&L percentage is calculated by dividing the unrealized P&L by the position margin and multiplying by 100%.

Realized P&L is calculated by multiplying the contract quantity by the difference between the exit price and the AEP.

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Perpetual Inverse Contracts are a type of contract where profits, margins, and other calculations are made in the same cryptocurrency as the base currency, such as BTC or ETH.

These contracts have no expiration date, giving you greater flexibility and less pressure in terms of closing the contract.

One of the key features of Perpetual Inverse Contracts is that they allow you to remain within the crypto ecosystem, minimizing the impact of fiat exchange rates.

The contracts have high liquidity, with more opportunities for profitable openings and closings of positions without worrying about affecting the price or experiencing a shortage of offers.

You can trade Perpetual Inverse Contracts on Bybit, with available currencies including BTCUSD, ETHUSD, and others.

Here are some key features of Bybit's Perpetual Inverse Contracts:

Trading fees on Bybit depend on three factors: which products you're trading, your VIP level, and whether you're a maker or a taker.

The funding rate is a crucial aspect of trading perpetual contracts on Bybit. It's a gauge of bullish or bearish sentiment for the spot price of the particular asset.

A positive funding rate occurs when the contract price is above the spot price, causing longs to pay shorts. Conversely, a negative funding rate happens when the contract price is below the spot price, causing shorts to pay longs.

The funding rate is used to calculate the funding fee, which is exchanged between longs and shorts every 8 hours. This fee is essential to keep the contract price relatively pegged to the index price.

The funding fee is calculated by multiplying the dollar value of your position times the funding rate. For instance, if you're longing bitcoin with a position value of $61,471 and the funding rate is 0.01%, you'll pay the shorts $6.14 at the end of the eight hour period.

Here's a breakdown of the funding rate conditions:

Keep an eye on the funding rate and fee, as they can eat into your profits or magnify your losses, especially if you're keeping your contract open for extended periods of time.

Trading is a financial activity where individuals buy and sell assets, such as cryptocurrencies, with the goal of making a profit.

In the context of Bybit, trading can involve buying and selling contracts, which represent a certain amount of a cryptocurrency, like Bitcoin.

To trade on Bybit, you need to have a clear understanding of the market and the contracts you're dealing with, as seen in the example of Trader A buying 10,000 contracts at a BTC price of $23,000.

Trader A's profit of 0.035 BTC was made by closing all positions when the BTC price rose to $25,000 and selling the equivalent amount of BTC.

A key aspect of trading is understanding the concept of profit and loss, as Trader A's profit was calculated by subtracting the amount of BTC sold from the amount of BTC bought.

Bybit's advanced derivatives, including Inverse Contracts and Perpetual Inverse Contracts, offer traders a range of options to suit their needs.

Trader A's trade involved buying and selling contracts, which resulted in a profit, demonstrating the potential of trading on Bybit.

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Perpetual Contracts offer great flexibility, but you need to consider their features. They can be a great tool for traders, but you need to be aware of the potential risks.

One of the key features of Perpetual Contracts is that they have no expiration date, which gives you greater flexibility and less pressure in terms of needing to close the contract. This is especially beneficial for traders who want to remain within the crypto ecosystem and minimize the impact of fiat exchange rates.

Perpetual Inverse Contracts, in particular, use cryptocurrencies like BTC and ETH as the base currency for calculations. This means that profits, margins, and other calculations are made in the same cryptocurrency, considering price fluctuations.

High liquidity is another advantage of Perpetual Inverse Contracts. Since cryptocurrencies like BTC and ETH are more volatile, you have more opportunities for profitable openings and closings of positions without worrying that the deal will significantly impact the price or experience a shortage of offers.

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However, Perpetual Inverse Contracts also come with high risks. For example, if your base currency for calculation is BTC, you may lose not only from the trade but also due to a decrease in the value of BTC itself.

Here are some key features of Perpetual Inverse Contracts on Bybit:

Having a solid insurance fund in place can provide significant peace of mind for traders. Bybit's insurance fund, valued at over $200 million AUD, is a notable example of this.

This fund is designed to protect margin traders against forced liquidation at prices below the bankruptcy level. This means traders can focus on their strategy without worrying about unexpected losses.

By covering losses exceeding the initial margin, the fund safeguards against deleveraging and excessive negative equity. This can help prevent traders from getting into even more trouble during a downturn.

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Mastering trading on Bybit's perpetual futures requires the right tools and skills. The Mastering Trading Course, created by Lark Davis, is a great resource for learning how to read market signals and use technical analysis tools.

Bybit's trading interface is impressively equipped with a built-in TradingView API, allowing you to modify charts using indicators. This feature is a big plus for traders who want to customize their charts.

To take your trading skills to the next level, consider taking the Mastering Trading Course, which includes a dedicated module on how to get the most out of Bybit.

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If you're looking to take your trading skills on Bybit to the next level, you'll want to check out the Mastering Trading Course by Lark Davis.

This comprehensive course is designed to help you read market signals and use technical analysis tools with confidence.

Inside the course, you'll find a dedicated module on how to get the most out of Bybit, which is perfect for anyone aiming to become a skilled trader on the platform.

Whether you're new to trading or looking to sharpen your strategies, this course has everything you need to trade smarter and with real confidence.

The course is created by Lark Davis himself, so you know you're getting practical guidance from an expert in the field.

Bybit's express trading option is a game-changer, allowing for quick and easy transactions from fiat to 17 different cryptocurrencies, although be mindful of third-party payment gateway fees that can add up.

The trading interface may seem overwhelming at first, but trust me, you'll get accustomed to it quickly.

Bybit's built-in TradingView API is a huge plus, enabling you to modify charts using indicators and giving you a competitive edge.

The order tab on the right side of the website makes it a breeze to place stop losses and take profits.

Having the ability to define a "trigger price" for SL or TP is a great feature, allowing you to immediately quit your digital currency position if needed.

Browsing order book information and market depth is also a valuable tool, helping you make informed trading decisions.

Bybit's lightning-fast transaction times and real-time price feeds make it a top choice for derivatives trading.

The platform's variety of complex trading instruments is also a major draw, catering to experienced traders.

Bybit's NFT marketplace, earnings hub, and customized charts set it apart from its competitors in the Australian market.

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Bybit's Pre-Market Perpetuals offer early access to potential promising new contracts, allowing users to engage with future values prior to their official market debut.

This innovative product enables users to trade perpetual contracts on forthcoming tokens, providing an opportunity to hedge spot positions and secure profits effectively.

Traders can place orders with up to 5x leverage before the contract is officially listed, which helps avoid potential entry cost increases due to price volatility at launch.

The ability to hedge spot positions using Pre-Market Perpetuals offers traders a significant risk management tool, allowing them to minimize risks and safeguard investments.

Bybit's introduction of Pre-Market Perpetuals reinforces its position as a trailblazer in the cryptocurrency market, giving opportunities for early access and risk management.

Pre-Market Perpetuals are designed to offer early access to new tokens, allowing users to secure potential profits and minimize risks.

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Bybit perpetual futures are a type of investment that amplifies both profits and losses, making it a more advanced form of trading.

Bybit is not a platform designed around spot trading, so if you're looking for that, you might want to consider another exchange.

Traders in several countries, including the United States, United Kingdom, and Canada, cannot access Bybit, so be sure to check if it's available in your area.

Bybit offers a vast range of trading and earning products, including perpetual contracts, liquidity mining, and dual asset trading, which can be appealing to experienced traders.

Here's a brief rundown of the pros and cons of Bybit perpetual futures:

Bybit was founded in 2018 in Singapore and is now headquartered in Dubai, giving it a unique perspective on the cryptocurrency market.

Bybit's focus on derivatives over spot trading may make it attractive to experienced traders, but it's essential to have an exit strategy and never invest more than you can afford to lose.

Bybit perpetual futures are a powerful trading tool, and understanding the basics is essential for getting started. Bybit was launched in 2018 by Ben Zhou and is primarily a derivatives exchange.

Bybit's headquarters are now located in the United Arab Emirates, and it's incorporated in the British Virgin Islands. It's a key asset that Bybit promises to handle 100 trades per second, 24 hours a day with no downtime. This level of reliability is impressive, especially considering Bybit's security record, which has so far remained unbreached.

If you're new to trading, it's worth noting that Bybit is geared towards more advanced traders who are comfortable with margin and futures trading.

In this article, we'll explore the concept of a table of contents and how it helps readers navigate and understand complex information.

A table of contents is a list of headings and subheadings that outline the structure and organization of a document or article, like the one we're reading now.

Bybit inverse perpetual contracts are a type of advanced trading tool that allows users to stay fully in cryptocurrency without interacting with fiat conversion.

Perpetual contracts are a type of contract that doesn't have an expiration date, which can be both good and bad depending on the user's needs and preferences.

Professional crypto traders often prefer perpetual contracts because they don't have to worry about expiration dates, which can be a major advantage.

However, perpetual contracts also require careful consideration and attention to detail to avoid potential pitfalls and risks.

Bybit is a derivatives exchange that was launched in 2018 by former international currency broker Ben Zhou, who still owns the company and serves as CEO.

Bybit is headquartered in the United Arab Emirates and is officially incorporated in the British Virgin Islands. It initially operated in Singapore and Hong Kong.

Bybit is primarily a derivatives exchange, focusing on margin and futures trading at higher leverage, which can result in amplified risks and potential profits.

You can buy futures contracts with a prescribed settlement date or perpetual contracts that can be held indefinitely on Bybit.

Bybit promises to handle 100 trades per second, 24 hours a day with no downtime, making it a reliable platform.

So far, Bybit has maintained its promise of security, as it is one of the few exchanges to have never been hacked.

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