Perpetual Futures

A perpetual future is a leveraged derivative that tracks the spot price of a crypto asset but never expires. Because there is no settlement date to force convergence, exchanges use a funding mechanism: at fixed intervals (commonly every 8 hours) the side that is "crowded" pays the other side, nudging the contract price back toward spot. Leverage is set by margin: posting a fraction of the notional value controls the full position, so a small adverse move can wipe out the margin and trigger liquidation. Perps are popular for their flexibility and deep liquidity, but they are among the riskiest instruments a retail trader can touch.

In plain English — A perpetual future ("perp") lets you take a long or short position on a crypto asset without owning it and without an expiry date. Unlike traditional futures, it never settles on a fixed date; instead a "funding rate" payment between longs and shorts keeps its price tethered to the underlying spot price. Perps usually offer leverage, which magnifies both gains and losses and introduces liquidation risk.

You open a long BTC perpetual at $60,000 with 5x leverage using $1,000 of margin (controlling $5,000 of exposure). If BTC rises 4% to $62,400, your position gains ~$200 (20% on your margin); if it falls 4%, you lose ~$200 — the same move, magnified by leverage.