Perpetual Futures (Perps)
Perpetual futures, or perps, are futures contracts with no expiry date. Traders can hold them as long as their margin lasts, and a periodic funding payment between longs and shorts keeps the contract price close to the spot price. They are the most widely traded type of crypto derivative.
How perps differ from normal futures
A classic futures contract expires on a set date and settles at the spot price, which pulls its price towards spot over time. A perpetual never expires, so it needs another anchor. That anchor is the funding rate: at regular intervals, often every eight hours, one side pays the other.
When the perp trades above spot, funding is usually positive and longs pay shorts, which encourages traders to sell the perp and pushes it back down. When the perp trades below spot, shorts typically pay longs. BitMEX popularized this design in 2016, and it has since become the standard on many centralized and decentralized exchanges.
An example
Say you deposit 500 USDC as margin and open a 10x long on a BTC perp, giving 5,000 USDC of exposure. If BTC rises 4 percent, you gain about 200 USDC, minus fees. If funding is positive at 0.01 percent per eight hours, you pay about 0.50 USDC each interval while you hold the position. If BTC falls around 9 to 10 percent, your margin is close to used up and the position is liquidated.
Why they are so popular
Perps offer leverage, easy shorting and no need to roll contracts. They trade around the clock and are usually settled in stablecoins or crypto. For hedgers, they are a simple way to offset a spot holding.
The risks
High leverage means small price moves can wipe out your margin, and funding costs add up when you hold for weeks. Liquidations use the mark price, not the last trade, which protects against some manipulation but can surprise beginners. In extreme moves, platforms may use insurance funds or auto-deleveraging, which can close even profitable positions. Perps are not legally available to retail traders in every country, and offshore platforms carry counterparty risk.
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Frequently asked questions
Why are they called perpetual?
Because they have no expiry date. You can keep the position open indefinitely as long as you have enough margin and pay or receive funding.
Do I own the coin when I trade a perp?
No. A perp is a contract that tracks the price. You gain or lose based on price changes but never hold the underlying coin.
How often is funding paid?
It depends on the platform. Every eight hours is common, but some exchanges settle hourly or use other intervals.
Related terms
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