A cryptocurrency exchange has introduced a new product called “Kraken Perps,” which consists of simplified perpetual contracts available to eligible clients in specific regions worldwide. This offering enables users to speculate on cryptocurrency price movements without the necessity of actually owning the underlying assets.
These perpetual contracts are designed to provide a means for traders to anticipate future price changes, whether they believe the market will rise or fall. Unlike traditional bets, these contracts have no expiration date or lock-in period, allowing users the flexibility to maintain their positions for as long as they desire. Moreover, traders have the option to adjust their positions in response to changing market sentiments or to liquidate their holdings at their own discretion.
The operational structure of these contracts is rooted in derivatives trading principles. Users can initiate trades by utilizing collateral from their exchange account, with USD currently being the primary collateral accepted. Future expansions may include additional assets as collateral options. Traders can choose to amplify or reduce their exposure based on their expectations regarding the price of a particular cryptocurrency.
The exchange’s move aligns with the growing interest in trading instruments that provide options for managing market risk and expressing various market views. For instance, if a trader holds a bullish sentiment on Bitcoin, they might choose to take a long position using perpetual contracts. Conversely, a bearish outlook could lead them to short the same contracts. The absence of an expiration date differentiates these contracts from standard futures, granting traders considerable flexibility.
In light of simplifying the process, the exchange has committed to offering educational resources to support users in understanding the complexities and risks associated with these products. Despite this effort, some observers express concern that the use of sports betting metaphors to explain the instruments may not adequately prepare retail clients to grasp the intricacies of leverage and volatility inherent in trading.
Currently, Kraken Perps are operational in select regions, and there are plans to extend their availability further. The products are positioned as tools for traders to express market opinions rather than encouraging day trading behaviors.
Earlier this year, the exchange had also ventured into forex trading by launching perpetual contracts for significant currency pairs such as EUR/USD and GBP/USD. This expansion allows for around-the-clock trading of these currency pairs, marking a notable shift in the offerings of the exchange that enables users to access traditional fiat markets alongside their cryptocurrency trading activities.
The perpetual contracts for forex trade similarly to their cryptocurrency counterparts, operating without an expiration, which sets them apart from typical forex products bound by designated trading hours or maturity dates. By using familiar mechanics from its existing crypto contracts, the exchange aims to ensure that users have a seamless trading experience.
Recent reports highlight that the exchange facilitated $5.4 billion in forex spot trading volume, of which a substantial portion—$3.5 billion—originated from the EUR/USD and GBP/USD pairs. The introduction of perpetual contracts for forex aims to enhance access to these frequently traded pairs while leveraging established infrastructure tailored for cryptocurrency derivatives.
In summary, the launch of Kraken Perps represents a significant development in the cryptocurrency trading landscape, offering users new avenues for speculation without requiring ownership of the assets. This innovation, coupled with an expansion into forex trading, may indicate a broader strategy to integrate traditional finance mechanisms into the evolving landscape of digital trading.