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Definition: crypto derivative


Similar to financial derivatives in the stock market, crypto derivatives, embodied in options and future contracts, facilitate liquidity.

Options
Crypto options enable the option buyer to buy or sell a crypto at a target price by a future date. Buyers may choose not to exercise their options.

Futures and Perpetual Futures
Crypto futures have a duration, and futures buyers bet on a token price rising (going long) or declining (going short) by a certain date.

Popular among day traders, there is no expiration date on a perpetual futures contract. Also called "perpetual swaps," accounts must contain a minimum (margin), and traders pay a holding fee. See crypto liquidity pool.