Perpetual futures (perps)
A perpetual future (perp) is a derivatives contract that lets a trader take leveraged long or short exposure to an asset's price with no expiry date. Instead of settling on a delivery date like a traditional future, it uses a periodic funding rate to keep its price anchored to the underlying spot price.
How it works
A trader posts margin and controls a larger position through leverage, going long to profit from a rise or short to profit from a fall. Because there is no expiry, the funding rate — paid between longs and shorts every few hours — is what keeps the perp price from drifting away from spot. Profit and loss accrue continuously against a mark price.
Why it matters
Perps are the dominant instrument in crypto by volume: they offer leverage, easy shorting and no need to hold the underlying. That concentration means perp data is a window into market positioning — funding shows which side is crowded, and open interest shows how much leverage is in the system. For how these venues are built on-chain, see the desk note on how perp DEXs work.
How to read the market
Watch three numbers together. Funding tells you how positioning leans; open interest tells you how much leverage is built up; liquidations tell you when that leverage is being forcibly unwound. Rising open interest with extreme funding is the classic setup for a violent liquidation cascade.
Common misreads
Leverage magnifies losses as much as gains, and a position is closed at its liquidation price, not when you choose. Funding quietly erodes returns on a crowded side. And liquidations trigger off the mark price, which can differ from the last traded price on a single venue.