Perpetual futures (also called “perps”) are derivative contracts that allow traders to speculate on the price of a cryptocurrency with leverage, without ever taking delivery of the underlying asset and — crucially — with no expiry date. Unlike traditional futures contracts that expire on a set date, perpetual futures can be held indefinitely. They are the most heavily traded crypto derivative product, with daily volumes on centralised exchanges like Binance, Bybit, and OKX regularly exceeding spot trading volumes by 3–5x. Decentralised perpetual exchanges like GMX, dYdX, and Hyperliquid have brought perps on-chain.
How perpetual futures work: traders open long (buy) or short (sell) positions with leverage (typically 1x–100x). A funding rate mechanism keeps the perp price anchored to the spot price: when longs dominate, they pay shorts; when shorts dominate, they pay longs. This creates a continuous equilibrium. Key concepts for perp traders: Margin — the collateral deposited to open a position; Leverage — the multiplier applied (10x leverage means a 10% move doubles or wipes your margin); Liquidation price — the price at which your margin is consumed and your position forcibly closed; Mark price — the fair value price used for liquidation calculations; and Funding rate — the periodic payment between longs and shorts. Perps are powerful tools but carry extreme risk, particularly at high leverage.
Example: A trader opens a 10x long BTC perpetual with $1,000 margin. This gives $10,000 exposure. A 5% BTC price rise returns $500 profit (50% on margin). A 10% drop triggers liquidation, losing the full $1,000.
Learn more: Investopedia — Perpetual Futures Explained
