Cryptocurrency exchange Kraken has introduced a new derivative product, Kraken Perps, aiming to simplify derivative trading for retail crypto investors.
According to a blog post by the US-based cryptocurrency exchange, the new product will make perpetual contracts, currently available only to eligible clients in select regions globally, accessible to all retail crypto investors.
Kraken Perps Integrated into Main App
Kraken Perps will enable retail crypto investors to gain access to advanced tools that facilitate derivatives trading. Unlike the traditional futures trading tool, perpetual contracts don’t expire, meaning users have more control. Perpetual agreements allow users to hold positions for the longest time, enabling them to make adjustments when market sentiment changes.
Also read: Kraken Expands Offshore With New Bermuda Derivatives Trading Platform
According to the press release, Kraken Perps has been integrated into the platform’s main App, meaning it can be accessible to more retail crypto traders. The firm observed that the main aim was to demystify derivatives trading and make it accessible to everyone. Additionally, Kraken Perps will give traders options like customizable stop-loss orders to mitigate risk.
A Betting Analogy
Explaining why they used a betting analogy for a complex trading instrument, the firm said in its statement:
“Perps are trading instruments designed to let users speculate on future price movements, up or down, without owning the asset involved.”
The exchange further explained:
“Unlike a bet with your friend, there’s no expiry date or lock-in period, so you can hold your position as long as you want […] you also have the freedom to adjust the size of the position if you have more conviction over time, or cash out anytime.”
Despite using the betting analogy, the firm explained that the mechanics of Kraken Perps will remain rooted in derivatives trading. To open trade, a trader will need to fund trades using collateral from their account balance. At the launch, USD will serve as the supported collateral, but other assets will follow in due course. Participating retail crypto investors will choose between increasing and decreasing exposure to the selected cryptocurrency price.
Also read: Kraken Aims for $15B Valuation With $500M Raise Ahead of 2026 IPO
Targeting Everyday Investors
The firm revealed that Kraken Perps, which was already live in select regions, aims to become a tool for expressing market views and building portfolio strategies for retail crypto traders. The firm noted that it was pitching perps to “everyday investors” because it has some “built-in protections.” For example, the in-built stop-loss function will limit potential losses any time “the market moves oppositely to how you predicted.” Kraken said:
“Perps aren’t about becoming a day trader. It’s about having more ways and the right tools to express your views on the market, manage risk, or add an extra layer of strategy to your portfolio.”
Conclusion
While Kraken Perps is designed to simplify derivatives trading and make it flexible and accessible to retail crypto traders, the exchange emphasizes that it may not be suitable for everyone. Nonetheless, Kraken aims to democratize access to sophisticated trading tools and make derivatives trading more accessible and intuitive.
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Summary
- Kraken has launched a new product, Kraken Perps, for retail investors to trade perpetual contracts.
- Perpetual contracts allow users to speculate on crypto price movements without owning the underlying asset.
- Kraken Perps does not have an expiration date, giving traders the flexibility to hold positions indefinitely.
- The feature has been integrated into Kraken’s main App, making advanced trading accessible.
Glossary to Key Terms
Kraken Perps: Cryptocurrency exchange Kraken’s new product allows eligible traders to speculate on the price movements of crypto assets using perpetual futures contracts.
Derivatives trading: Buying and selling of financial contracts (derivatives) whose value is derived from an underlying asset, such as a stock or crypto.
Perpetual contracts: A type of financial derivative, common in cryptocurrency markets, that allows traders to speculate on an asset’s price without a fixed expiration date, enabling them to hold a position indefinitely.
Frequently Asked Questions of Derivatives Trading
What are the basics of derivatives trading?
Derivatives are financial contracts set between two or more parties that derive their value from an underlying asset, a group of assets, or a benchmark.
What are derivatives in crypto trading?
Crypto derivatives are financial contracts whose value is derived from the price of an underlying cryptocurrency. These instruments allow traders to speculate on future price movements without owning the underlying assets.
Who regulates crypto derivatives?
In the US, derivatives are regulated by the Commodity Futures Trading Commission (CFTC).
What is the golden rule of crypto?
The most important rule is never to invest more than you can afford to lose.
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