Perpetual Futures

Perpetual futures (perps) are derivative contracts that track an asset's price and can be held indefinitely, because unlike traditional futures they have no expiry or settlement date. Invented for crypto markets, they have become the most heavily traded crypto instrument, offering leverage and easy short exposure without ever touching the underlying coins.

For example, a trader can open a 5x leveraged long on a BTC perpetual with $2,000 margin, controlling $10,000 of exposure. There is no expiry to roll over; the position stays open until the trader closes it, is liquidated, or stops maintaining margin.

What keeps a perpetual's price tied to the real spot price is the funding rate: periodic payments between longs and shorts that make it costly to hold the side pushing the contract away from spot. Perps exist on centralized exchanges and, increasingly, on decentralized ones. A common misconception is that trading a BTC perpetual means owning Bitcoin; a perp holder has a contract position and a claim against the exchange or protocol, with no coins, no wallet withdrawal of the underlying, and exposure to liquidation and funding costs that a spot holder never faces.