The cryptocurrency market has experienced significant shifts since the bull run of late 2017. After peaking near $20,000, Bitcoin (BTC) entered a prolonged downturn, plummeting to as low as $3,000 by early 2019. Although a modest rally pushed prices up to $14,000 in June that year, the upward momentum quickly faded. Despite a brief resurgence following blockchain-related policy encouragement in October 2019, the broader bearish trend remained intact. The sharp correction beginning March 12, 2020, further confirmed that the market was firmly entrenched in a bear cycle.
In bull markets, holding spot assets often yields solid returns with minimal effort. However, during bear markets, spot trading becomes increasingly challenging. Investors frequently buy into promising projects only to watch prices stagnate or decline under persistent downward pressure. Emotional decision-making—panic selling, repeated losses, and eroded confidence—can turn even seasoned traders into what the community calls "lambs ready for slaughter."
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But there's a better way: derivatives trading. With instruments like futures and options, traders can profit in both rising and falling markets. Leveraged positions amplify gains from small price movements—though they also increase risk. This article focuses on digital asset futures, particularly perpetual contracts, and explores how to trade them effectively in a bear market.
Perpetual vs. Delivery Contracts: Key Differences
Futures contracts in crypto come in two primary forms: delivery contracts and perpetual contracts.
Delivery Contracts
These are time-bound futures with fixed expiration dates, similar to traditional commodity futures. Upon expiry, positions are settled either in cash or through physical delivery of the underlying asset.
Perpetual Contracts
Unique to cryptocurrency markets, perpetual contracts have no expiration date. Traders can hold positions indefinitely, making them ideal for long-term directional bets.
A defining feature of perpetual contracts is the funding rate mechanism, designed to keep contract prices closely aligned with spot prices. Here's how it works:
- When the funding rate is positive, long-position holders pay short-position holders.
- When negative, shorts pay longs.
- Funding is typically settled every 8 hours (three times daily) across major exchanges.
This mechanism minimizes price divergence and reduces premium risk compared to delivery contracts.
For example, during the extreme market volatility on March 13, 2020, Huobi’s BTC quarterly futures traded at a $410 discount to spot—a massive negative premium that triggered premature liquidations for many traders.
Additionally, perpetual contracts use mark price (based on spot index) for liquidation calculations, protecting traders from "price wicks" or sudden spikes caused by thin order books. In contrast, delivery contracts often rely on last-traded price, leaving them vulnerable to manipulation and cascading liquidations during flash crashes.
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Another advantage of perpetual contracts is risk-free arbitrage opportunities via funding rates. For instance:
- If the funding rate is positive before settlement, a trader can open a short perpetual position and hedge with a long spot position.
- At settlement, they earn the funding payment.
- Afterward, both positions are closed simultaneously.
As long as funding income exceeds transaction fees, this strategy generates profit. In February 2025, Binance’s ETHUSDT perpetual contract recorded a funding rate of 0.1127%, enabling some traders to achieve over 10% monthly returns through repeated execution of this strategy.
Linear (USDT) vs. Inverse (Coin-Margined) Contracts
Perpetual contracts are further categorized into two types based on margin denomination:
Linear (USDT-Margined) Contracts
- Margin and profits are denominated in stablecoins like USDT.
- Ideal for bear markets because profits remain stable in fiat-equivalent value.
- Example: Open a 10x short on BTC at $6,000 using $600 USDT margin. If BTC drops 10% to $5,400, profit = $600 (in stable value).
Inverse (Coin-Margined) Contracts
- Margin and P&L are in cryptocurrency (e.g., BTC).
- Profits are paid in BTC, which may depreciate during downtrends.
- Same scenario: 10x short with 0.1 BTC margin. Profit = 0.1 BTC, but when converted to USD at $5,400, it’s only $540—and the initial margin itself lost value.
Thus, linear contracts are more suitable in bear markets, preserving purchasing power. Conversely, inverse contracts shine in bull runs—allowing traders to benefit from both directional gains and asset appreciation.
Why Choose ALOKEX for Perpetual Trading?
ALOKEX specializes in perpetual futures with support for both linear (USDT) and inverse (coin-margined) contracts. Its dual-price mechanism protects against wick-based liquidations, offering enhanced safety during volatile conditions.
When selecting a derivatives exchange, consider these five critical factors:
1. Security
Protecting capital is paramount. Historical incidents like Mt. Gox’s collapse and Fcoin’s exit scam highlight the risks of poor custodial practices. ALOKEX prioritizes security by implementing manual withdrawal verification, processed daily at 4 PM UTC. While slightly slower, this significantly reduces the risk of unauthorized fund movement.
2. Fee Structure
Transaction costs directly impact profitability—especially for high-frequency or algorithmic strategies. ALOKEX offers a competitive fee model:
- Maker rebate: -0.025% (you get paid to provide liquidity)
- Taker fee: 0.075%
This maker-friendly structure benefits market makers and passive traders alike.
3. Order Book Depth
Trading cost consists of fees and slippage, which depends heavily on market depth. Shallow books lead to higher slippage and vulnerability to price manipulation.
Thanks to its attractive fee incentives, ALOKEX has attracted numerous market makers. As a result, BTC/USDT perpetual pairs maintain bid-ask depth exceeding $1 million on both sides**, peaking at **$2.6 million—ensuring tight spreads and smooth execution.
4. System Stability
During periods of high volatility, many exchanges suffer outages—commonly referred to as “pulling the plug.” On March 12, platforms like BitMEX and OKX experienced downtime, preventing users from closing positions and leading to avoidable losses.
ALOKEX demonstrated superior resilience during that event, maintaining uptime and responsiveness—proof of robust infrastructure capable of handling extreme load.
5. User Experience
Even powerful tools fail if the interface isn't intuitive. ALOKEX delivers a clean, streamlined experience across web and mobile apps, focusing exclusively on derivatives trading. The absence of clutter enhances usability, enabling faster decisions and seamless execution.
Frequently Asked Questions
Q: What is the main advantage of perpetual contracts over delivery contracts?
A: Perpetual contracts don’t expire and use funding rates to track spot prices closely. They also employ mark price for liquidations, reducing vulnerability to flash crashes.
Q: Why are USDT-margined contracts better in bear markets?
A: Because profits are realized in stablecoin value, preserving real-world purchasing power even as crypto prices fall.
Q: How can I profit from funding rates?
A: By opening a position opposite to the funding direction (e.g., short when rate is positive), hedging with spot, collecting funding, then closing both legs—locking in risk-free gains if fees are covered.
Q: Is ALOKEX safe for large deposits?
A: Yes. Manual withdrawal approval adds an extra layer of security, minimizing risks associated with automated hot wallets.
Q: Does ALOKEX offer mobile trading?
A: Yes. The ALOKEX app provides full functionality with a user-friendly design optimized for contract trading.
Q: Can I trade both long and short on ALOKEX?
A: Absolutely. The platform supports full bidirectional trading with leverage up to 100x depending on the pair.
Final Thoughts
In bear markets, passive holding rarely pays off. To generate consistent returns, traders must embrace tools that allow profit in both directions. Perpetual futures—especially USDT-margined linear contracts—offer precision, flexibility, and leverage while mitigating systemic risks like slippage and forced liquidation.
Platforms like ALOKEX enhance this edge with deep liquidity, strong security protocols, and trader-centric design. Whether you're hedging existing portfolios or actively speculating on price moves, understanding these mechanics gives you a strategic advantage.
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By combining smart instrument selection with disciplined risk management, traders can thrive—even when the broader market falters.
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