What Are Perpetual Futures? How Crypto Perps Work Explained

Perpetual futures (perps) are crypto derivative contracts that let traders go long or short an asset with leverage and have no expiry date. Instead of settling on a fixed date, they use a recurring funding rate to keep their price close to the spot price. Perps are among the most traded products in crypto.

Key takeaways

• Perps never expire, so a position can stay open as long as margin allows.
• They are kept close to spot by funding payments between longs and shorts.
• You can go long or short with leverage, which also brings liquidation risk.
• Linear perps settle in stablecoins; inverse perps settle in the coin itself.
• Liquidations and unrealized PnL use the mark price, not the last traded price.

How perpetual futures work

A perp is a contract between two traders. One side is long and profits if the price rises. The other side is short and profits if it falls. Neither side owns the underlying coin. The exchange holds margin from both sides and settles profit and loss as the price moves.

Three prices matter:

• Last price: the price of the latest trade on the perp.
• Index price: an average of spot prices from several exchanges.
• Mark price: a fair price used for PnL and liquidations.

See mark price vs index price for how they differ.

Perps vs spot vs dated futures

Feature	Spot	Dated futures	Perpetual futures
Own the asset	Yes	No	No
Expiry date	None	Yes (e.g. quarterly)	None
Leverage	No (unless margin trading)	Yes	Yes
Can go short	Not directly	Yes	Yes
Price anchor to spot	Is spot	Converges at expiry	Funding rate
Holding cost	None	Priced into the basis	Funding payments

Linear vs inverse perpetuals

Type	Margin and settlement	Example	PnL paid in
Linear (USDT- or USDC-margined)	Stablecoin	BTCUSDT perp	Stablecoin
Inverse (coin-margined)	The coin itself	BTCUSD perp margined in BTC	BTC

Linear contracts are easier to reason about because gains and losses are in dollars. Inverse contracts add a second exposure: your margin itself changes value as the coin price moves.

Worked example: a leveraged long

You deposit $1,000 of USDT and open a 5x long on BTC at $50,000. Your position size (notional) is $5,000, or 0.1 BTC.

BTC rises to $52,000 (+4%) over 10 days. Funding is 0.01% per 8 hours, and taker fees are 0.05%.

Item	Amount
Price PnL: 0.1 BTC × $2,000	+$200.00
Funding paid: $5,000 × 0.01% × 30 payments	−$15.00
Opening fee: $5,000 × 0.05%	−$2.50
Closing fee: $5,200 × 0.05%	−$2.60
Net profit	+$179.90

A 4% price move produced about an 18% return on margin. The same leverage works in reverse: a 4% drop would have cost about the same amount, and a drop close to 20% would liquidate the position. The funding line assumes the notional stays near $5,000; in practice it is charged on the position value at each funding time. Check where your own position would be closed with the liquidation price calculator.

Why traders use perpetual futures

• Directional trading with leverage and no need to roll contracts.
• Shorting an asset without borrowing it.
• Hedging a spot holding, for example in a delta-neutral position.
• Earning funding through a cash-and-carry trade or cross-exchange funding arbitrage.

Risks of perpetual futures

1. Liquidation: leverage means small moves can wipe out margin.
2. Funding costs: when funding is strongly positive, holding a long can be expensive over time.
3. Fees: every open and close pays maker or taker fees.
4. Exchange risk: margin is held by the venue, whether a centralized exchange or a smart contract.
5. Wicks and thin liquidity: smaller markets can move sharply on a single large order.

Where to see live perp data

Funding rates, intervals and conventions differ by exchange. Many centralized exchanges pay funding every 8 hours, while perp DEXs such as Hyperliquid pay every hour. Compare current rates on the live funding rates page, or see which venues are covered on the exchanges page.