What Are Perpetual Futures? A Plain-English Guide

Perpetual futures — "perps" — are the single most-traded product in crypto. They let traders bet on the price of an asset, long or short, with leverage, and without ever having to hold the asset itself. If you're building or evaluating a derivatives venue, understanding perps is table stakes.

A futures contract that never expires

A traditional futures contract has an expiry date. As it approaches expiry, its price naturally converges with the spot price of the underlying asset. A perpetual future removes the expiry entirely — you can hold the position indefinitely (Kraken: perpetual futures contracts).

That creates a problem: without expiry, what stops the contract price from drifting far away from spot? The answer is the funding rate — a small periodic payment exchanged directly between longs and shorts that nudges the perp price back toward spot (Coinbase: funding rates). We cover that mechanism in depth in Funding Rates Explained.

Long, short, and leverage

Two things make perps powerful:

• You can go short as easily as long. Profit from falling prices, not just rising ones.
• Leverage. You post a fraction of the position's value as margin, and the venue lets you control a larger notional. At 20x, $1,000 of margin controls $20,000 of exposure.

Leverage magnifies gains and losses — and if the market moves far enough against you, your position is liquidated. Try it below: raise the leverage and watch how little the price has to move against you.

The higher the leverage, the closer your liquidation price sits to your entry. That's the core trade-off, and it's why risk controls matter so much — see How Leverage Really Works and How Liquidation Price Is Calculated.

Margin: isolated vs. cross

When you open a leveraged position, you choose how your collateral is committed. Isolated margin ring-fences a fixed amount per position; cross margin shares your whole balance across positions. The choice changes how and when you get liquidated — covered in Isolated vs. Cross Margin.

The takeaway

A perpetual future is a no-expiry, leveraged contract that tracks spot through funding payments. It's the product most crypto traders actually use — and the reason a modern exchange is really a derivatives exchange first.

Mechanics described here are standard across major venues; specific parameters (funding intervals, margin tiers) vary by exchange.