What Are Perpetual Futures?
Perpetual futures (perps) are derivative contracts that function like traditional futures but never expire. Instead of settlement at a fixed date, they use a funding rate mechanism — periodic payments between longs and shorts — to keep the contract price aligned with the spot market. They are by far the most traded instrument in crypto, accounting for over 75% of all crypto derivatives volume.
How Perpetual Futures Work
Perps mirror the price of the underlying asset. When the perp price trades above spot, positive funding makes longs pay shorts, incentivizing arbitrageurs to short the perp and buy spot — pushing the price back. When it trades below spot, negative funding makes shorts pay longs, encouraging the reverse.
Funding payments occur every 8 hours on most exchanges. Combined with leverage (up to 100x on some platforms), perps provide capital-efficient directional exposure and short-selling capability.
Why It Matters for Traders
Perps generate the richest data in crypto: funding rates reveal sentiment, open interest shows positioning, liquidation levels predict volatility zones, and basis vs spot reveals the cost of leverage. Mastering perpetual futures data is effectively mastering the derivatives market that drives crypto price discovery.
How It Works on CEX Perps
On centralized perpetual futures venues, perpetual futures shows up in the position panel, the funding timer, or the liquidation engine rather than as a separate product. Traders usually check it next to mark price, margin mode, and open interest so they do not size a trade from last price alone.
Example numbers only (not a live quote): if you hold a $10,000 notional long with 5x leverage, your initial margin is about $2,000. A move against you of roughly 20% of that notional can push the position near maintenance margin depending on the venue formula. Always read the venue's own liquidation rule before you size.
Formula and Worked Example
Use this only as a labeled example. It is not a live market print.
- Notional = coin size × mark price.
- Initial margin ≈ notional ÷ leverage.
- Distance to liquidation depends on maintenance margin, fees, and whether you use cross or isolated margin.
Example: 0.1 BTC long, mark $60,000, leverage 10x → notional $6,000, initial margin about $600. If maintenance margin is near 0.5% of notional, a modest adverse move can close the trade even when your thesis is still intact.
Common Mistakes
- Treating a single print of perpetual futures as a trade signal without checking funding, open interest, and your liquidation price.
- Mixing venue conventions (coin-margined vs USDT-margined, cross vs isolated) and reading the wrong mark.
- Copying example numbers from a glossary into live size without checking the current book depth and fee schedule.
- Ignoring related terms that change the meaning of the print on a given day.
