What Is a Perpetual Futures Contract? (Simple Guide)

Most crypto leverage trading happens on perpetual futures — often called "perps." They're the most popular derivative in crypto, yet many traders use them without really knowing how they work. Here's the plain-English version.

The one-sentence definition

A perpetual future is a contract that lets you bet on a coin's price — long or short, with leverage — that never expires. You can hold the position for an hour or a year.

How it differs from spot

When you buy spot, you own the actual coin. With a perpetual you own a contract that tracks the price — you never hold the underlying asset. That's what lets you use leverage and go short (profit when price falls) just as easily as long.

Why "perpetual"?

Traditional futures have an expiry date. Perpetuals removed it, which created a problem: with no expiry, nothing forces the contract price to match the real spot price. The fix is the funding rate — a small payment exchanged between longs and shorts every few hours that nudges the perp price back toward spot. We cover it in the funding rate guide.

The risk: liquidation

Because perps use leverage, a move against you can wipe out your margin and trigger liquidation. Always know your liquidation price and size by risk before entering.