A new type of cryptocurrency derivative is set to launch. Users will soon be able to trade the first-ever perpetual forex swaps using cryptocurrency margin – with leverage of up to 50x.
This innovative offering enables traders to speculate on major forex pairs around the clock, even when traditional forex markets are closed. Users can go long or short on pairs like EUR/USD using Bitcoin (XBT) or Tether (USDT) as margin and for settlement.
The introduction of forex swap contracts unlocks new trading strategies and significantly expands the versatility of crypto-based trading platforms. This development is part of a broader effort to provide traders with a wider range of crypto-margined contracts, allowing exposure to various currencies and financial products.
This guide covers everything you need to know about trading forex swaps with cryptocurrency margin.
Understanding Perpetual Forex Swaps
Perpetual forex swaps are a new class of cryptocurrency derivatives that allow traders to capitalize on price movements between foreign currency pairs such as EUR/USD and USD/MXN.
Traders can use Bitcoin (XBT) or Tether (USDT ERC-20) as margin – and profit in XBT or USDT – based on exchange rate fluctuations of specific forex pairs.
Since these instruments are entirely margined and settled in cryptocurrency, perpetual forex swaps can be traded 24/7 without any exposure to fiat currencies. The contracts will trade until Friday close when no forex prices are available.
Like other perpetual swap contracts, BitMEX's forex perpetual swaps utilize a funding rate mechanism (periodic payments between long and short traders based on the difference between the perpetual contract market and spot prices).
Key Features of Perpetual Contracts
Perpetual swaps share similarities with futures contracts, which allow traders to buy or sell an asset at a specific price on a predetermined date. However, perpetual contracts have several distinct characteristics:
- Perpetual contracts trade indefinitely, meaning there is no expiration or settlement except for early settlement events. Traders can hold perpetual swap positions as long as they maintain sufficient margin.
- Perpetual contracts mimic margin-based spot markets, trading close to the relevant reference index price.
- The funding rate mechanism anchors contracts to their underlying spot prices.
- Unlike futures contracts, which may trade at significantly different prices due to expiration time value, perpetuals maintain closer price alignment with spot markets.
Perpetual contracts are particularly popular among advanced traders seeking to profit from price movements without holding the underlying asset.
What Crypto Margin Trading Means
Margin trading allows users to establish larger positions by requiring less collateral. Often called "leveraged trading," it provides traders with greater purchasing power for their positions. While leveraged positions carry increased risk, they also offer potential for greater returns compared to standard spot trading.
In cryptocurrency derivatives, margin refers to the amount of funds required to enter a leveraged position. When we describe our upcoming forex contracts as USDT- or XBT-margined contracts, we mean these contracts are margined and settled in USDT or XBT.
When trading futures and perpetual swap contracts, traders don't need to post 100% of their collateral as margin – meaning users can trade forex perpetuals with up to 50x leverage, and some contracts with up to 100x leverage. 👉 Explore advanced margin trading strategies
Understanding Forex Pairs
Foreign currency pairs represent the quotation of two different currencies – the amount you would pay in one currency to obtain one unit of another. For example, when EUR/USD is quoted at 0.9000, it means you can exchange 1 Euro for 0.9 US Dollars. Forex pairs trade on the foreign exchange market – the world's largest and most liquid asset class.
In forex markets, currency prices are quoted in pairs. The first currency in a pair (e.g., 'EUR' in EUR/USD) is considered the "base currency," while the second part is the "quote currency."
How Perpetual Forex Swap Products Work
Our perpetual forex swap products operate through the following mechanism:
- Forex perpetuals are exchange-traded through a central limit order book (CLOB). The funding rate mechanism ensures trading prices remain close to the index price (a composite forex spot price).
- Note: Funding occurs every 8 hours at 04:00 UTC, 12:00 UTC, and 20:00 UTC. You only pay or receive funding if you hold a position at these times.
- When the funding rate is positive, longs pay shorts. When negative, shorts pay longs.
- Traders can purchase forex perpetuals via limit and market orders. Order book liquidity transparently determines spreads and slippage.
- Our forex swaps are margined and settled in Tether (USDT ERC-20) or Bitcoin (XBT).
- Our forex swaps allow users to trade with up to 50x leverage, meaning users don't need to post 100% of their collateral as margin.
Three types of perpetual forex contracts are available:
Quanto Contracts: Cryptocurrency derivatives where the underlying currency pair is priced in two assets, but the derivative settles in a third "quanto" asset. All our quanto forex swaps have a fixed XBT multiplier – regardless of forex prices, traders gain or lose a specific amount of XBT for particular price movements.
Inverse Contracts: When trading inverse contracts, users first deposit a specific cryptocurrency, and these contracts settle in the relevant cryptocurrency (rather than the quote currency). For example, traders of USDT/MXN receive their payout in USDT.
Linear Contracts: These are linearly settled contracts that don't directly involve fiat currencies but instead use more intuitive dollar-like assets (i.e., stablecoins like USDT) for payments.
Forex Swap Trading: Practical Examples
To illustrate the benefits of forex perpetual trading, consider these examples (the individuals mentioned are not real):
- Hedgers: Amy is a trader with trading positions and margin in USD and USDT. With the Euro hovering near parity with the Dollar, she wants to protect the value of her Euro holdings – so she decides to go long on EURUSDT, a linear forex swap that effectively sells Dollars against Euros. When the Euro appreciates, her swap position gains value – offsetting losses on her Dollar/USDT Euro holdings. Conversely, if the Euro depreciates, her swap position loses value while her trading positions appreciate.
- Speculators: Becky, a BitMEX trader, has a strong directional view that the South African Rand (ZAR) will weaken in the near future based on upcoming global events. She wants to profit from this view using her Bitcoin holdings to trade a USD/ZAR forex swap margined in XBT. She goes long 10,000 USDZAR quanto swap contracts at 17.00 with 20x leverage. Each contract gains 0.0001 XBT for every 1 ZAR price increase. If the price rises to 18.00, Becky will gain 1 XBT profit on her position (before funding gains/losses) – achieving a 117% return on capital.
- Market Makers: Todd is a market maker (a user who places maker trades) and serves as a liquidity bridge between BitMEX and traditional financial markets. Todd makes markets on BitMEX – for example, quoting a one-way price of 6.77-6.78 on USDTCNH forex swaps and preparing to respond to various trading prices.
If a trader buys from Todd at BitMEX's quoted 6.78, he will attempt to hedge his risk with market orders on another venue. In this case, according to our current fee schedule, he would earn a basis point rebate as a BitMEX market maker, which he hopes will be more valuable than the cost of market orders on traditional financial venues. He profits by regularly capturing bid-ask spreads while remaining as risk-neutral as possible.
- Arbitrageurs: Like Todd, Bob can access both BitMEX and traditional financial markets, acting as a liquidity bridge between both worlds. As an arbitrageur, he constantly seeks risk-free or low-risk trades that profit from short-term discrepancies between the two markets.
He might notice that, after adjusting for funding, BitMEX's NZDUSDT is trading at 0.6300 while the NZDUSD spot market is at 0.6200. Expecting this price difference to narrow, he sells 1 million NZDUSDT contracts and buys 1 million NZD vs USD in the fiat spot market. If prices converge to 0.6000, he would earn $30,000 on his BitMEX position while losing $20,000 on his spot position – netting approximately $10,000 profit.
- Access: Ekin-Su is a trader whose income is paid in a currency that isn't freely convertible. She's concerned about this currency's depreciation. To hedge this risk, she can use her existing USDT cryptocurrency holdings to trade the equivalent forex pair – for example, by going long/short on inverse forex swaps.
Frequently Asked Questions
What are perpetual forex swaps?
Perpetual forex swaps are cryptocurrency derivatives that allow traders to speculate on foreign exchange rate movements using crypto margin. They combine features of traditional forex trading with the flexibility of perpetual contracts that never expire.
How does funding work in perpetual forex swaps?
Funding occurs every 8 hours at predetermined UTC times. The funding rate mechanism ensures contracts trade close to spot prices. When the rate is positive, long positions pay short positions; when negative, shorts pay longs. You only participate in funding if you hold a position at funding times.
What leverage is available for forex swaps?
Our platform offers up to 50x leverage for forex perpetual swaps, meaning traders can control positions worth 50 times their collateral. Different contracts may have varying leverage limits based on their risk characteristics.
Can I trade forex swaps 24/7?
Yes, since these instruments are margined and settled in cryptocurrency, they can be traded around the clock, even when traditional forex markets are closed. The only exception is during Friday close when no forex prices are available.
What types of forex contracts are available?
We offer three contract types: quanto contracts (fixed XBT multiplier), inverse contracts (settled in crypto), and linear contracts (settled in stablecoins). Each type serves different trading needs and risk preferences.
Do I need to hold fiat currency to trade these instruments?
No, these are pure cryptocurrency products. All margin requirements and settlements occur in Bitcoin (XBT) or Tether (USDT), eliminating the need for direct fiat currency involvement.
The introduction of crypto-margined perpetual forex swaps represents a significant advancement in digital asset trading, combining the liquidity of forex markets with the innovation of cryptocurrency derivatives. 👉 Discover real-time trading tools