Perpetual futures, often called "perps," are a type of futures contract with no expiration date, allowing a position to be held indefinitely. They are one of the most heavily traded derivatives products on crypto exchanges, since crypto markets popularized the structure more than traditional finance had.
Because a perpetual contract never settles or expires, exchanges need a mechanism to keep its price tethered to the actual spot price of the underlying asset — that mechanism is the funding rate, a periodic payment between long and short traders. Perpetuals are commonly traded with leverage, which magnifies both potential gains and the risk of forced liquidation.
Perpetual futures are considered an advanced, high-risk trading instrument, not a way to simply "hold" an asset. This is general information, not financial advice, and not a recommendation to open a leveraged position.
Key takeaways
- Perpetual futures are expiration-free crypto derivatives contracts kept anchored to the underlying spot price through a funding rate mechanism, allowing traders to hold a position indefinitely without a settlement date.
- These contracts are commonly traded with leverage, which magnifies both potential gains and the risk of forced liquidation, and they rank among the most heavily traded derivatives on crypto exchanges.
- Perpetual futures are considered an advanced, high-risk trading instrument rather than a simple way to hold an asset, and crypto markets have popularized this contract structure more than traditional finance has.
Perpetual Futures — frequently asked questions
What makes perpetual futures different from regular futures?
Regular futures contracts expire on a set date, while perpetual futures never expire. Instead, a periodic funding rate payment between long and short traders keeps the contract price tethered to the underlying spot price.
Can I lose more than I put in trading perpetual futures?
Leveraged positions in perpetual futures carry the risk of forced liquidation, and losses can exceed initial margin depending on the exchange and position size. This is high-risk, educational information, not financial advice or a trading recommendation.
Are perpetual futures a good way to hold crypto long term?
No, they are generally not designed for that. Perpetual futures are considered an advanced, high-risk trading instrument for speculation, hedging, or leveraged exposure, not a simple way to hold an underlying asset over time.
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