# Perpetual Futures > Perpetual futures are crypto derivatives with no expiry, kept close to spot by funding payments. Learn how perps work, leverage, margin, funding and the main risks. Source: https://learn.tradelabsai.com/crypto/perpetual-futures/ Track: Crypto · Level: Intermediate · Updated: 2026-10-03 Publisher: TradeLabs AI (https://tradelabsai.com). Education, not financial advice. Cite as: TradeLabs Learn, "Perpetual Futures", https://learn.tradelabsai.com/crypto/perpetual-futures/ A perpetual futures contract, or perp, is a derivative that tracks the price of a crypto asset but never expires. Traders can go long or short with leverage, and a periodic funding payment between longs and shorts keeps the perp's price close to the spot price. Perpetuals are the most traded instruments in crypto, with daily volume often several times that of spot markets. They are powerful tools for speculation and hedging, and they are also where most crypto liquidations happen. ## How perps differ from traditional futures | Feature | Traditional futures | Perpetual futures | |---|---|---| | Expiry | Fixed date | None | | Price convergence | Converges to spot at expiry | Funding payments pull it toward spot | | Rolling | Required to keep exposure | Not needed | | Typical venue | Regulated exchanges (CME) | Crypto exchanges, some DEXs | | Leverage | Set by exchange margins | Often adjustable, sometimes 50x or more | The perpetual swap design was popularised by BitMEX in 2016 and is now offered by most crypto derivatives exchanges. See [How Futures Contracts Work](https://learn.tradelabsai.com/futures/how-futures-contracts-work/). ## Funding payments Every funding interval, often every 8 hours (some venues use 1 hour), one side pays the other: - **Perp above spot (positive funding):** longs pay shorts. - **Perp below spot (negative funding):** shorts pay longs. ``` funding payment = position value × funding rate ``` **Example: Paying funding** You are long $50,000 of BTC perps. The funding rate is +0.01% per 8 hours. Each interval, you pay $50,000 × 0.0001 = $5. Over a day (three intervals), $15; over a year at that rate, about $5,475, roughly 11% of the position. In strong bull markets, funding can rise much higher, making long positions expensive to hold. See [Funding Rates](https://learn.tradelabsai.com/crypto/funding-rates/). ## Margin and leverage | Term | Meaning | |---|---| | Initial margin | Collateral needed to open a position | | Maintenance margin | Minimum collateral to keep it open | | Leverage | Position value divided by margin | | Isolated margin | Margin assigned to one position only | | Cross margin | All account balance supports all positions | | Liquidation price | Price at which the position is closed by the exchange | ``` approximate liquidation move for a long ≈ 1 / leverage - maintenance margin rate ``` With 10x leverage and 0.5% maintenance margin, a fall of about 9.5% triggers liquidation. With 50x, a fall of about 1.5% does. See [Liquidations in Crypto](https://learn.tradelabsai.com/crypto/liquidations-in-crypto/). ## Mark price Exchanges use a mark price, based on a spot index plus a funding adjustment, to calculate unrealised profit and liquidations, rather than the last traded price. This protects traders from being liquidated by a single manipulated trade. See [Mark Price vs Index Price](https://learn.tradelabsai.com/crypto/mark-price-vs-index-price/). ## Linear vs inverse perps | Type | Margin and settlement | Example | |---|---|---| | Linear (USD margined) | Stablecoins | BTCUSDT perp | | Inverse (coin margined) | The underlying coin | BTCUSD perp settled in BTC | Inverse contracts add extra risk for longs: as BTC falls, both the position and the BTC collateral lose value. ## Uses of perps - **Directional trading** with leverage, long or short. - **Hedging** spot holdings without selling them. - **Basis and funding trades:** long spot, short perp to collect positive funding. See [Funding and Basis Arbitrage](https://learn.tradelabsai.com/crypto/funding-and-basis-arbitrage/). - **Market making** on exchanges. ## Risks - **Liquidation** from small moves at high leverage. - **Funding costs** in crowded trades. - **Exchange risk:** custody, outages, rule changes. - **Auto deleveraging** in extreme moves. See [Insurance Funds and Auto-Deleveraging](https://learn.tradelabsai.com/crypto/auto-deleveraging/). - **Wicks:** sharp, brief price spikes that trigger liquidations. - **Regulatory restrictions:** perps are not available to retail traders in some countries, including the US on most offshore venues. ## Frequently asked questions ### What is a perpetual futures contract? A crypto derivative that tracks an asset's price with no expiry, using periodic funding payments to keep it close to spot. ### Who pays funding in perpetual futures? When the perp trades above spot, longs pay shorts; when below, shorts pay longs. ### Why are perps risky? High leverage means small price moves can trigger liquidation, and funding costs can add up in crowded trades. Next, look closer at the payments that anchor perps in [Funding Rates](https://learn.tradelabsai.com/crypto/funding-rates/). ## Continue learning - Next lesson: [Funding Rates](https://learn.tradelabsai.com/crypto/funding-rates/) - Previous lesson: [Crypto Spot Trading](https://learn.tradelabsai.com/crypto/crypto-spot-trading/) - Related: [Crypto Spot Trading](https://learn.tradelabsai.com/crypto/crypto-spot-trading/): Spot trading means buying and selling actual crypto at current prices. Learn order types, pairs, fees, sizing, custody and how spot differs from derivatives. - Related: [Funding Rates](https://learn.tradelabsai.com/crypto/funding-rates/): Funding rates are periodic payments between longs and shorts on perpetual futures. Learn how they are calculated, what extreme funding means and how to use it. - Related: [Liquidations in Crypto](https://learn.tradelabsai.com/crypto/liquidations-in-crypto/): A liquidation is the forced closing of a leveraged crypto position when margin runs out. Learn how liquidation prices work, cascades, heatmaps and how to avoid them. - Related: [Mark Price vs Index Price](https://learn.tradelabsai.com/crypto/mark-price-vs-index-price/): Crypto derivatives use three prices: last, index and mark. Learn how each is calculated, why mark price triggers liquidations and why gaps between them matter. - Related: [Insurance Funds and Auto-Deleveraging](https://learn.tradelabsai.com/crypto/auto-deleveraging/): Auto deleveraging closes profitable positions when liquidations cannot be absorbed. Learn how ADL works, how traders are ranked and how to reduce the risk. - Related: [Crypto Futures and Basis](https://learn.tradelabsai.com/crypto/crypto-futures-and-basis/): Dated crypto futures trade at a premium or discount to spot called the basis. Learn CME and exchange futures, how to annualise basis and what it tells traders.