Cryptocurrency trading offers various methods for investors to engage with the market. Perpetual futures trading is most popular, but some exchanges offer CFDs (Contracts for Difference). While both allow traders to speculate on price movements without owning the actual asset, they operate differently.
Key Takeaways & Differences:
- Leverage and Margin: CFD margins are typically a percentage of the trade value, whereas perpetual futures margins are set by the exchange and vary with market conditions.
- Fees and Costs: CFD trading incurs costs through spreads and overnight financing charges, whereas perpetual futures involve funding rates that can be either a cost or a benefit depending on market conditions and positions held.
This guide will break down their differences, benefits, and risks in a way that’s easy to understand.
Key Differences Between CFD and Perpetual Futures Trading
Primary differences between CFDs and perpetual futures are in the way margin and fees work. You can hold either CFD or perp futures contract indefinitely, as neither has an expiry date.
1. Margin
Both CFDs and perpetual futures use leverage, but the way margin is calculated can differ:
- In CFD trading, the margin requirement is typically a percentage of the total trade value.
- In perpetual futures trading, margin requirements are set by the exchange and can vary based on market conditions and the asset’s volatility.
2. Fees
Trading costs also differ between CFDs and perpetual futures.
- CFD trading typically involves paying a spread (the difference between the buy and sell price) and overnight financing charges if you hold a position overnight.
- Perpetual futures trading usually involves paying the funding rate, which can be a cost or a benefit depending on your position and the prevailing market conditions.
There might also be trading fees per transaction on the exchange. Opening and closing positions will typically charge you maker or taker fees.
On Futures, the funding rate is typically charged once every 8 hours. If the funding rate is positive, long positions pay short positions and vice versa. This mechanism keeps the contract price close to the spot price.
CFD vs Futures Similarities
- Both CFD and Perp Futures let you open short or long positions, betting on price movements in any direction.
- You can hold positions indefinitely as long as you have sufficient margin to cover potential losses and prevent liquidation.
- You can apply leverage to either CFD or Futures.
Find exchanges with futures trading | Find exchanges with CFD trading
Comparison of CFDs, Crypto Futures and Perpetual Futures Trading
Quick comparison of trading CFD contracts, crypto futures and crypto perpetual futures:
Detailed CFD vs Futures vs Perps comparison:
Need even more aspects compared? Check out our comprehensive table below for a full comparison of trading CFD, Futures and Perps!
| Aspect | Crypto CFDs | Crypto Futures | Crypto Perpetual Futures (Perps) |
|---|---|---|---|
| Definition | Contract with a broker to speculate on crypto price | Time-bound contract to buy/sell crypto at a future date | Futures contract with no expiry date |
| Ownership of Crypto | No actual ownership, only price speculation | No ownership (unless settled in crypto, rare) | No ownership, just price exposure |
| Expiry Date | No expiry | Fixed expiry (e.g., monthly, quarterly) | No expiry — open-ended |
| Settlement | Cash-settled | Cash or crypto settled at expiry | Cash-settled periodically (funding every 8h, typically) |
| Leverage | Up to 100x on some brokers, often unregulated | Leverage allowed, limited by exchange rules | High leverage (up to 125x on some platforms) |
| Funding Fees | Overnight swap fees | No funding fees (may have roll-over cost) | Regular funding payments between long & short positions |
| Contract Size | Customizable (fractional trades possible) | Standardized sizes set by exchange | Flexible, often fractional |
| Liquidity Source | Broker-based, OTC | Centralized exchange order books | Deep liquidity, mostly on major crypto derivatives platforms |
| Fees | Spread + overnight fees | Commission + bid/ask spread | Spread + trading fee + funding fees |
| Trading Hours | 24/7 | 24/7 (on crypto exchanges) | 24/7 |
| Regulation | Often less regulated | More regulated (esp. CME, institutional markets) | Varies widely; mostly unregulated |
| Hedging Use | Limited institutional use | Used for institutional hedging strategies | Common for both retail and institutional hedging |
| Price Tracking | Broker-controlled prices, may not match spot markets | Closely follows index price; may deviate at expiry | Pegged to spot via funding rate mechanism |
| Slippage & Risk | Higher slippage, depending on broker | Lower slippage on high-liquidity exchanges | Slippage possible during high volatility |
| Best For | Beginners, short-term retail speculators | Long-term hedgers, institutional traders | Active traders, scalpers, and short-term strategies |
| Margin Requirements | Low entry barrier, small minimums | Higher, depends on exchange and contract | Low to medium, dynamic margins based on volatility |
| Tax Complexity | Often simpler (depends on country) | May involve complex capital gains rules | Tax treatment varies by country |
| Example Platforms | eToro, Capital.com, Plus500, PrimeXBT | Binance Futures, CME, Kraken Futures | Binance, Bybit, OKX, Deribit |
Benefits of CFD Trading
CFD trading offers several benefits, particularly for traders looking for flexibility and access to a wide range of markets.
- No Expiry Date – CFDs do not have an expiry date, allowing traders to hold positions for as long as they wish. This is ideal for those who want to take a long-term view on a market without worrying about contract rollover or expiry.
- Variety of Markets – CFDs provide access to a wide range of markets, including cryptocurrencies, stocks, commodities, indices, and forex. This diversity allows traders to diversify their portfolios and take advantage of various market opportunities.
- Leverage – CFDs offer high leverage, enabling traders to control larger positions with a smaller amount of capital. This can amplify profits, but it also increases the risk of significant losses.
Benefits of Perpetual Futures Trading
Perpetual futures trading also has distinct advantages, particularly for those looking to trade with more structure and less counterparty risk.
- No Expiry Date – Like CFDs, perpetual futures have no expiry date, allowing for indefinite holding periods. However, the funding rate mechanism helps keep the contract price in line with the spot market and balance shorts vs longs.
- High Liquidity – Perpetual futures contracts are often highly liquid, especially for popular cryptocurrencies like Bitcoin and Ethereum. This liquidity ensures that traders can enter and exit positions quickly and at desired prices.
- Leverage and Margin – Perpetual futures offer significant leverage, allowing traders to take large positions with relatively small amounts of capital. This can lead to substantial profits but also increases the potential for large losses.
Risks and Considerations
Both CFD and perpetual futures trading come with risks that traders need to consider.
- Volatility and Leverage – The volatility of cryptocurrencies can lead to significant price swings, which, when combined with leverage, can result in substantial gains or losses. It’s crucial for traders to use proper risk management and stop-loss orders, and to never invest more than they can afford to lose.
- Market Conditions – Market conditions can affect both CFD and perpetual futures trading. High volatility, low liquidity, and market news can impact prices and trading conditions. Traders should stay informed and adapt their strategies accordingly.
- Fees and Funding Rates – While CFDs involve paying spreads and potentially overnight financing charges, perpetual futures traders must consider the funding rate, which can impact profitability. Understanding these costs and how they affect your trading strategy is crucial.
Should You Trade Futures or CFDs?
Crypto CFD and perpetual futures trading offer exciting opportunities for traders looking to capitalize on the volatility of digital assets. While both methods allow for speculation on price movements, they differ in terms of ownership, expiry, leverage, and costs. CFD trading provides flexibility and access to a wide range of markets, while perpetual futures trading offers high liquidity and a mechanism to keep contract prices aligned with the spot market.
Traders should carefully consider their risk tolerance, trading objectives, and market conditions before choosing between CFDs and perpetual futures. By understanding the differences and utilizing proper risk management techniques, traders can make informed decisions and potentially achieve their financial goals.
Conclusion
Majority of crypto exchanges reviewed on our website have perpetual futures, with only a few such as PrimeXBT offering CFD trading. Perp futures are a far more popular day trading method for cryptocurrency investors.
But, whether you choose an exchange with CFDs or perpetual futures, staying informed and using the right tools is crucial. Explore both trading methods, practice with demo accounts, and continuously refine your skills.
