Why expirable futures?

Futures types

​State of crypto derivatives market by Jump Capital.
Contango is the expirable futures leader in DeFi. To understand why we need expirable futures, let's dive into the types of contracts available in CeFi:
  • Perpetual futures - Instruments without an expiry date that can be held indefinitely and where funding fees are periodically exchanged between long and short on a regular basis, e.g. each 8h, to keep the futures price tethered to the spot price. These funding rates are unpredictable, i.e. depending on the market conditions you can receive or pay money. Over a longer-term horizon, funding fees can start biting into your profits, as high as 30% annualized (Deribit insights). In a nutshell, you can't reliably control your costs with perpetuals.
  • Expirable futures - These instruments have expiry dates, e.g. a monthly contract can be traded up to the end of the month. When a trader buys or sells a contract, all costs are known upfront.
The following table compares the main pros and cons of each futures type.
Perpetual futures
Expirable futures
No expiration date
Control about the costs
No control about the costs
Expiration date
In our opinion, we do not see perpetual and expirable futures as competitors. Both are here to coexist: perps work well on a short time horizon where funding rates won't make a big dent in the position, whereas expirable futures are more suitable for longer-term trades.

Market size

In CeFi the total volume traded in 2021 was $112 trillions. Expirable futures represent a small portion ($6.6 trillion), yet their volume kept growing in 2021 - about 2.4x compared to 2020 (source: TokeInsight).
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Futures types
Market size