Perpetual futures (perps) are derivative contracts that track an underlying price without a fixed expiry date. Traders go long or short with leverage, post margin, and usually settle in cash or stablecoins rather than taking delivery of the spot asset. Crypto made perps a primary venue for directional bets and hedging because the contract never rolls off the calendar the way dated futures do.
Why it matters
Perps can dominate short-term price discovery. Large open interest means forced liquidations and funding flows can move the tape faster than spot buyers and sellers. A rally led by perp longs is a different market than a rally led by spot accumulation. Treating them as identical underweights the role of leverage and margin engines.
Key mechanics are funding, mark price, insurance funds, and liquidation. Funding nudges the contract toward spot. Mark price formulas try to reduce unfair liquidations from momentary wicks. When those systems fail under stress, cascades happen. Perps are powerful tools and concentrated risk surfaces at the same time.
For sizing, ask how much leverage you actually need, what happens if funding turns against you, and whether you can exit when books thin out. Perps are not spot ownership. You do not hold the coin. You hold a leveraged claim on its price path under the venue rules.
Simple example
You open a 10x long perpetual on ether. A move of roughly 10% against you can wipe the position through liquidation, depending on fees and maintenance margin. The same dollar exposure in spot would hurt, but it would not auto-close the same way. That difference is why perp tape and spot tape diverge during violent sessions.
Venue choice matters as much as direction. Insurance funds, ADL rules, and max leverage caps change how survivable a violent session feels. Read the contract specs before treating every perpetual ticker as interchangeable.
Related terms
See funding rate, liquidation, leverage, margin, and market structure. Browse more in the crypto glossary.