Perpetual futures: the no-expiry contract anchored by funding

What a perpetual future is

A perpetual future is a derivative that tracks an underlying asset — BTC, ETH or any other coin — with leverage. Unlike a traditional futures contract, it never expires. There is no delivery and no settlement date, so you can hold the position indefinitely: open it today and close it in a year, or never, as long as your margin covers it.

Because there is no expiry to force the price back to the underlying, the exchange needs another mechanism to stop the perp drifting away from spot. It uses two: a funding payment (see the funding rate) that transfers value between longs and shorts, and a mark price used to value positions for margin and liquidation.

Perpetual swaps were popularized by BitMEX in 2016 and are now by far the deepest-liquidity market in crypto — daily perp volume routinely dwarfs spot. When traders talk about 'the BTC price' moving, they are usually watching the perp.

Perps vs dated futures vs spot

Spot is the simplest: you own the asset outright. There is no leverage, no funding and no liquidation — if the price drops you still hold the coin. A dated future is a contract that expires on a set date and settles to spot then; its basis (the gap to spot) decays to zero at expiry, and to keep exposure past that date you must roll into the next contract.

A perp sits between them in spirit but behaves differently from both. It never expires, so funding — not an expiry date — does the anchoring, and there is no roll to manage. You get leveraged, always-on exposure that you can carry as long as you like without rebooking a contract every quarter.

That 'no roll, always-on leverage' property is exactly why perps dominate crypto volume. Traders get continuous leveraged exposure from a single position with a predictable carry cost (funding) instead of a calendar of expiries and rollovers.

Funding is the anchor

With no expiry to force convergence, a perp relies on funding to stay near spot. Funding is a small periodic payment that flows from the crowded side of the market to the other: when the perp trades above spot, longs pay shorts; when it trades below spot, shorts pay longs. That payment makes the crowded side pay to keep its position, nudging the perp price back toward spot.

The cadence differs by venue. Binance, Bybit and OKX settle funding every 8 hours; Hyperliquid settles every hour. Either way, funding is both the perp's tether to spot and the running carry cost of holding a position — hold a long through positive funding and you pay a little each cycle even if the price never moves.

Leverage, mark price and liquidation

Perps let you post a small amount of margin and control a much larger notional — 10x leverage means $1,000 of margin controls $10,000 of exposure. That amplifies both gains and losses, which is why the anchoring and valuation mechanics matter so much.

Positions are not valued at the last traded price. They are marked to a mark price derived from a multi-exchange index, so a single-venue wick — one exchange briefly printing a bad price — cannot unfairly trigger stops and liquidations across the market. If losses at the mark price grow until your margin can no longer cover them, the exchange force-closes the position: that is a liquidation.

The total size of all open perp positions is the open interest. It measures how much leveraged notional is outstanding in the contract, which — read alongside funding and price — tells you whether a move is driven by new positioning or by positions being closed.

Related

• Funding rate
• Mark price
• Liquidation
• Open interest