JustChartsWhat Are Perpetual Futures in Crypto? How Perps Work
Perpetual futures (“perps”) are derivatives that let you trade a crypto-asset’s price with leverage, long or short, without an expiry date. Instead of expiring, they stay close to the spot price through periodic funding payments between longs and shorts. They are the most traded crypto product, and their leverage makes liquidations common.
Key facts
- Expiry
- none
- Price anchor
- funding payments keep perp near spot
- Mark price
- fair-value price used for P&L and liquidations
- Settlement
- usually in USDT/USDC (linear) or the coin (inverse)
- Popularised by
- BitMEX’s Bitcoin perpetual swap (2016)
Perpetuals vs dated futures vs spot
| Spot | Dated futures | Perpetual futures | |
|---|---|---|---|
| Own the coin? | Yes | No | No |
| Expiry | — | Yes (e.g. quarterly) | No |
| Leverage | None (or margin loans) | Yes | Yes |
| Go short easily? | No | Yes | Yes |
| Ongoing cost | None | Basis to spot | Funding payments |
How perps stay close to spot
When a perp trades above spot, the funding rate turns positive and longs pay shorts, encouraging traders to sell the perp back down. When it trades below, shorts pay longs. This happens every few hours, so a perp can stay open indefinitely.
Mark price and index price
- Index price: an average spot price from several exchanges.
- Mark price: a fair-value price derived from the index, used to calculate unrealised profit and loss and to trigger liquidations — so a brief spike on one exchange doesn’t liquidate everyone.
- Last price: the most recent trade on the exchange.
Linear vs inverse contracts
Linear (USDT- or USDC-margined) contracts have profit and loss in stablecoins — the simplest to understand. Inverse (coin-margined) contracts settle in the coin itself, so your margin’s value also moves with the price.
Risks
High leverage means small moves can wipe out margin — see liquidation. Watch open interest and funding to gauge how crowded the market is.
Frequently asked questions
Do perpetual futures expire?
No. That is the defining feature — positions can stay open indefinitely, paying or receiving funding along the way.
What is the difference between mark price and last price?
Last price is the latest trade on that exchange; mark price is a fair value based on a multi-exchange index and is what most exchanges use for liquidations.
Are perpetual futures legal everywhere?
No. Several countries restrict or ban crypto derivatives for retail traders. Check the rules where you live and use a regulated platform where one is available.
Put it into practice
Live charts, an economic calendar and trading calculators — free with a JustCharts account.
See live crypto liquidationsThis article is for education only and is not financial advice. Trading leveraged products carries a high risk of losing money. Contract sizes, trading hours and leverage limits vary by broker and country — always check your own broker’s specifications.