What is Perpetual Futures (Perps)

Perpetual futures (perps) are derivative contracts that allow traders to speculate on cryptocurrency price movements — either long (profit if price rises) or short (profit if price falls) — with leverage, and with no expiry date. Unlike traditional futures contracts (which expire on a set date), perps can be held indefinitely. Perps are the most traded crypto derivative product, with daily volume often exceeding spot markets. HOW PERPETUAL FUTURES WORK A perp contract tracks the price of an underlying asset (e.g., BTC/USD) but is settled in cash — you never actually receive Bitcoin. You deposit collateral (USDC, ETH, or BTC), open a position with your chosen leverage (1x to 100x), and profit or lose based on price movement multiplied by your leverage. Leverage amplifies both gains and losses proportionally. THE FUNDING RATE MECHANISM Without expiry, perp contracts need a mechanism to keep their price anchored to the spot market. This is the funding rate: When perp price > spot price (more longs than shorts): Longs pay shorts a periodic funding fee — this incentivises more shorts and fewer longs, pushing the perp price back to spot. When perp price < spot price: Shorts pay longs. Funding rates are typically calculated and exchanged every 8 hours. During bull markets, funding rates are persistently positive — long traders pay continuously. CENTRALISED VS. DECENTRALISED PERPS Centralised (CEX perps): Binance, OKX, Bybit dominate. Off-chain order books, deep liquidity, fastest execution. Require KYC. Decentralised (DEX perps): dYdX v4 (Cosmos-based), GMX (Arbitrum/Avalanche), Hyperliquid (custom L1), Drift (Solana). On-chain, permissionless, self-custody. Hyperliquid became one of the highest-volume perp DEXs in 2024. RISKS OF TRADING PERPS Liquidation: If your position moves against you sufficiently, your collateral is liquidated automatically. 10x leverage means a 10% adverse move eliminates your position entirely. Funding rate drain: Holding leveraged long positions in bull markets incurs significant cumulative funding costs. Volatility risk: Crypto's extreme intraday volatility makes leveraged positions extremely risky.

Terms in addition to the Perpetual Futures (Perps)

Blockchain

A blockchain is a subset of a distributed database. The Bitcoin inventors originally prototyped the system in 2008. This modern database is made up of separate blocks that are connected together in a chronological chain. Blockchains may be used to store a wide range of data types. It has mostly been utilized as a public ledger for bitcoin transactions to date. A peer-to-peer network comprised of independent nodes uses a consensus process to ensure the blockchain's security and legitimacy. Each node in the network keeps a public and immutable copy of the data.

2 Factor Authentication (2FA)

2 Factor Authentication is a security measure with two layers. It is used by the majority of cryptocurrency exchanges. To log in, you must provide not only a password, but also a code obtained, for example, from the Google authenticator.

Airdrop

An airdrop is a method of distributing coins. End users can typically obtain coins for free or in exchange for doing a small task, such as subscribing to a newsletter, sending a tweet, or inviting others via a personal affiliate link. Cryptocurrency airdrops — the act of depositing cryptocurrency into public crypto wallets — are utilized as a marketing, liquidity creation, and network bootstrapping technique for many different types of blockchain initiatives.

Altcoin

Altcoin - "alternative coin" - is any kind of digital currency other than Bitcoin. Since the launch of Bitcoin, the world's first digital currency, many altcoins (as well as supporting blockchains) have been created. Altcoin digital currencies share many similarities to Bitcoin, but consistently and have significant differences. There are about 20,000 altcoins, and this number is expected to grow significantly in the coming years. Altcoins often develop Bitcoin features. Ethereum, currently the most widely used blockchain, supports digital contracts and separate applications where Bitcoin does not. Altcoins are also often created to cater to the needs of different users. The Litecoin blockchain, for example, can process payments quarterly for the duration of Bitcoin.

Cold Storage

Cold storage is the way to store cryptocurrency offline. The word refers to the use of offline wallets that are not connected to the internet. Cold storage is the most secure way to keep cryptocurrencies since an offline currency becomes less likely to be hacked and stolen. Paper wallets, printed renditions of private keys, and offline hardware and software wallets are all examples of cold storage.