What it is
Perpetual futures, or "perps," are derivative contracts that allow traders to speculate on the future price of a cryptocurrency without a fixed expiration date. Unlike traditional futures contracts, perps can be held indefinitely as long as the trader maintains sufficient margin. To keep the perpetual futures price tethered to the underlying spot price, a mechanism called the funding rate is used, which involves periodic payments between long and short positions.
Perpetual futures are a cornerstone of crypto trading on centralized and decentralized exchanges, offering high leverage and constant liquidity. News often reports on "open interest" in perpetual futures markets as a proxy for speculative activity and market sentiment. Large movements in perps can trigger "liquidations," especially during volatile periods, exacerbating price swings. Traders use perpetual futures for both speculation and hedging, but their leveraged nature means significant risk, requiring careful monitoring of margin levels and funding rates.
Why it matters
Perpetual futures are popular for leveraged trading in crypto markets. Understanding them is crucial for interpreting market sentiment, volatility, and liquidation cascades during price swings.
Reviewed under editorial standardsUpdated September 26, 2026Not investment advice