Bitcoin futures, often referred to as Bitcoin contracts, represent a powerful financial instrument that allows traders to speculate on the future price of Bitcoin without owning the underlying asset. Unlike spot trading—where you must physically hold cryptocurrency to buy or sell—Bitcoin contracts enable you to profit from both rising and falling markets through long (buy) and short (sell) positions. This makes them especially appealing for risk management, hedging, and leveraging market volatility.
On platforms like Binance, Bitcoin contracts are primarily offered in two forms: delivery contracts and perpetual contracts. Understanding the differences between these two types is essential for anyone looking to engage in advanced crypto trading.
What Are Bitcoin Futures Contracts?
A Bitcoin futures contract is an agreement to buy or sell Bitcoin at a predetermined price on a specific future date. However, most traders never intend to take physical delivery of BTC. Instead, they use these instruments to speculate on price movements or hedge existing holdings.
Key features of Bitcoin contracts:
- You trade based on price direction, not ownership.
- Profits and losses are calculated based on price changes.
- Leverage is commonly available, amplifying both gains and risks.
- Positions can be long (bullish) or short (bearish).
👉 Discover how professional traders use advanced contract strategies to maximize returns.
This dual-directional capability sets contract trading apart from traditional spot markets, where profits are only possible when prices rise.
Types of Bitcoin Contracts: Delivery vs Perpetual
There are two main types of Bitcoin contracts available on major exchanges such as Binance: delivery contracts and perpetual contracts. While both allow leveraged speculation on BTC prices, they differ significantly in structure, expiration, and settlement mechanisms.
1. Delivery Contracts: Fixed Expiry Dates
A delivery contract (also known as a dated or expiry futures contract) has a fixed maturity date—on which all open positions are automatically settled at the final mark price. These contracts are ideal for traders with a specific time horizon or those hedging short-term exposure.
Common Types of Delivery Contracts
- Weekly: Settles every Friday.
- Bi-weekly: Settles on the second Friday from the current date.
- Quarterly: Expires on the last Friday of March, June, September, or December—whichever is closest.
- Next Quarter: Expires on the second-closest quarterly month’s last Friday.
Example: If today is April 5th, the quarterly contract would expire on June 28th (last Friday), while the next quarter contract would expire on September 27th.
Special Rule During Quarterly Transitions:
In months ending with a quarterly expiry (March, June, September, December), the system adjusts contract generation to avoid overlapping expiries. Specifically:
- On the third-to-last Friday of a quarter, no new bi-weekly contract is created.
- Instead, a new next-quarter contract is introduced.
- Existing contracts shift up one tier (e.g., next quarter → current quarter).
Because delivery contracts have a defined end date, there's no need for ongoing funding mechanisms. Traders simply close or roll over positions before settlement.
2. Perpetual Contracts: No Expiry, Continuous Trading
Perpetual contracts are a crypto-native innovation designed to offer the benefits of futures trading without an expiration date. As the name suggests, you can hold a perpetual contract indefinitely, provided your margin remains sufficient to avoid liquidation.
This flexibility makes perpetuals highly popular among active traders who want to maintain long-term directional bets without worrying about rollover logistics.
Key Features of Perpetual Contracts
🔹 Funding Rate Mechanism
Since perpetual contracts don’t expire, they rely on a funding rate to keep their market price closely aligned with the underlying spot price (e.g., BTC/USDT index).
- Funding occurs every 8 hours.
- If the funding rate is positive, long position holders pay short holders.
- If it's negative, short position holders pay longs.
Formula:
Funding Fee = Position Value × Funding Rate
This mechanism discourages prolonged price divergence and ensures fair value alignment between futures and spot markets.
🔹 Quote Currency vs Settlement Asset
Perpetual contracts come in two varieties:
- USDT-margined (Linear): Priced and settled in USDT. Profits and losses are denominated in stablecoins—ideal for precise risk control.
- Coin-margined (Inverse): Priced in USDT but collateralized in BTC. Your P&L fluctuates in BTC terms, adding complexity but useful for native asset holders.
🔹 Tiered Margin & Partial Liquidation
To improve risk management, modern platforms implement tiered margin systems and partial liquidation:
- When liquidation risk increases, the system checks your position tier.
- It may reduce your position incrementally (partial liquidation) rather than wiping out your entire balance immediately.
- Only if equity drops below zero after step-down adjustments will full liquidation occur.
This protects traders from sudden market spikes while maintaining exchange solvency.
👉 Learn how tiered margin systems help manage risk in volatile markets.
Frequently Asked Questions (FAQ)
Q1: What’s the main difference between delivery and perpetual contracts?
Delivery contracts have fixed expiry dates and settle automatically, while perpetual contracts have no expiry and rely on funding rates to track spot prices.
Q2: Can I hold a delivery contract past its expiry?
No. All open delivery contracts are settled automatically at expiry based on the final mark price. You must close or roll over your position manually before this time.
Q3: Why do perpetual contracts have funding fees?
Funding fees ensure the contract price stays close to the real-world spot price. Without this mechanism, perpetuals could deviate significantly due to speculative pressure.
Q4: Are perpetual contracts riskier than delivery contracts?
They carry similar leverage risks, but perpetuals introduce ongoing funding costs (or income). Traders holding long positions during high-funding environments may face continuous expenses.
Q5: Which contract type is better for beginners?
USDT-margined perpetual contracts are often recommended for newcomers due to their stablecoin-denominated P&L and intuitive pricing.
Q6: How do I avoid liquidation in contract trading?
Use conservative leverage, set stop-loss orders, monitor your margin ratio, and understand the tiered liquidation rules of your platform.
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Final Thoughts
Whether you're hedging a BTC portfolio or actively speculating on price swings, understanding the mechanics of Bitcoin delivery and perpetual contracts is crucial. Delivery contracts suit time-bound strategies and institutional hedging, while perpetuals offer unmatched flexibility for continuous market exposure.
With proper risk controls—and tools like tiered margins and funding rate monitoring—you can navigate either market with greater confidence.
👉 Start applying these concepts with real-time data and advanced charting tools today.