Perpetual Future

A perpetual future, often called a perpetual swap or “perp,” is a derivatives contract that tracks the price of an underlying asset such as bitcoin or ether but does not expire. Unlike a traditional futures contract, which settles on a set date, a perpetual future can stay open as long as the trader maintains required margin and the exchange allows it. Because there is no expiry date to force convergence with the spot market, perpetual futures use a funding rate: periodic payments between long and short traders that help keep the contract price close to the asset’s market price.

Perpetual futures matter because they are widely used in crypto trading to gain leveraged exposure, hedge an existing position, or trade both rising and falling markets. For example, a trader who owns bitcoin might open a short perpetual future to reduce downside exposure if the price falls. Compared with buying spot crypto, trading a perpetual future does not require owning the asset, but it introduces added risks such as liquidation, funding costs, and rapid losses when leverage is used.