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How does perpetual contracts work when the counter party closes?

Started by Bitcoin, Apr 24, 2022, 08:30 am

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Bitcoin

How does perpetual contracts work when the counter party closes?

As I understand how crypto perpetual contracts work - when I enter a long position on a crypto exchange, my order is matched with a counter party short. The long/buyer and short/seller will exchange the difference in value between the time a contract opens and closes.


Assuming the exchange uses a $1 USD contract side and the current BTC price is $10,000. If I go long $100 with zero leverage then I would be matched with 100 short contracts on the books at $10,000 price.


What happens though if price increases by 5% so my long is in profit but the short contracts I was matched with get closed.. they had a stop loss or where liquidated. Soon after the price goes up another 1% and I want to sell. Who pays my 6% ?


Does anyone know how this works please ?


Thank you.


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