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.
FAQ
How the desk uses it
The desk cares about perps because they are where leverage and positioning become observable: funding and open interest exist only because the contract has no expiry. Works best with funding and liquidation levels. Used in TT by Funding Stress and the screener.