By Keel Research Team · Updated May 13, 2026
A perpetual future is a leveraged derivative that tracks the spot price of an underlying asset and never expires. Funding payments between longs and shorts replace the expiration mechanism that normally anchors futures to spot. The dominant trading format in crypto since 2016.
A perpetual future ("perp" for short) is the dominant derivatives instrument in crypto. It lets you go long or short on an asset with leverage, holds its price near spot via a clever mechanism, and never expires. Bitmex invented the format in 2016; by 2020 it was the largest crypto derivative by volume. Today the perpetual format is how the majority of crypto trading happens.
To understand perps, it helps to start with what traditional futures do and what perps changed.
A traditional futures contract is an agreement to buy or sell an asset at a specified price on a specific future date. CME's E-mini S&P 500 futures expire quarterly — March, June, September, December. The contract price converges to spot at expiration, by definition: if it didn't, arbitrageurs would close the gap.
This works for commodity markets where physical delivery scheduling matters (you wanted oil in March, not whenever). It's clunkier for financial assets that trade 24/7 — traders constantly "roll" expiring contracts into the next quarter, paying spread cost and friction every quarter.
The perpetual eliminates expiration entirely. Instead of converging to spot through expiry, the perp uses periodic funding payments to make it costly to hold price away from spot:
Over time, the funding cost pulls the crowded side out of the position, and the perp converges back to spot. Same outcome as quarterly futures (price tracks underlying), different mechanism (continuous funding instead of fixed-date convergence). See /learn/funding-rate for the full mechanics.
Three primary use cases drive most perp volume.
1. Leveraged directional exposure. Want $50,000 of BTC exposure? Hold a 5x perp position with $10,000 of margin instead of buying $50,000 of spot. You keep $40,000 of the original capital deployable elsewhere. Capital efficiency is the most common motivation.
2. Hedging spot positions. If you hold spot BTC and want temporary downside protection around an event (earnings, Fed announcement, regulatory news), short the BTC perp. Spot and perp track each other closely, so the perp short offsets the spot long.
3. Carry strategies. When funding is heavily positive on a perp, traders short the perp and hedge with spot to collect the funding rate while staying market-neutral. The funding-carry pattern is one of the most studied edges in crypto; the funding-carry strategy template walks through a real Keel implementation with backtest numbers.
Leverage is the multiplier between your margin and position size. A 10x position with $1,000 margin controls $10,000 of notional exposure. Higher leverage means smaller margin per dollar of exposure — but also a tighter window before the position liquidates.
If the price moves against you far enough that your margin can't cover the loss minus the maintenance-margin reserve, the venue's liquidation engine closes the position. You lose essentially all the margin you posted. See /learn/hyperliquid-liquidation for the formula and practical risk-management implications.
The practical rule: leverage should be sized so normal volatility doesn't threaten liquidation. A 50x position has a ~2% cushion to liquidation; a 5x position has 20%. The right number depends on the asset's volatility and how long you plan to hold.
The perpetual format isn't limited to crypto. As of late 2025, Hyperliquid's HIP-3 standard lets independent builders deploy perpetual markets on any underlying — including US equities. The result: 24/7 perpetual contracts tracking NVDA, TSLA, AAPL, the S&P 500, and more, on-chain and non-custodial.
The mechanics are identical to crypto perps. The oracle reads the equity price during US market hours, then holds when the cash market closes. Funding settles hourly; trading continues overnight and weekends. The perp can drift from the last cash close — that's expected behavior, and funding pulls it back when markets reopen.
See /learn/stock-perpetuals-explained for the equity-perp specifics, or /perps for the full coverage of HIP-3 equity markets on Hyperliquid.
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A perpetual future is a derivative contract that tracks the price of an underlying asset, lets you go long or short with leverage, and never expires — funding payments between longs and shorts replace the expiration mechanism that normally anchors futures to spot.
Traditional futures have an expiration date — March, June, September, December for index futures. They converge to spot at expiry. Perps never expire. Funding is the substitute mechanism: small periodic payments that make it costly to push the perp away from spot, anchoring the price.
Three reasons. (1) No roll friction — traditional traders constantly roll quarterlies as they approach expiry, which adds cost and complexity. Perps eliminate that. (2) Capital efficiency — one position, no calendar fragmentation. (3) Native to 24/7 markets — fixed-expiry futures originated for commodity-delivery scheduling; that constraint never applied to crypto. Bitmex introduced the perp in 2016; the format dominates today.
Two mechanisms working together. (1) An oracle reads the spot price periodically and reports it as the index. (2) Funding rates — when the perp trades above the oracle, longs pay shorts at a small rate per period; when below, shorts pay longs. The funding cost makes the crowded side close out, dragging the perp back toward spot. On Hyperliquid funding settles hourly; on most CEXs every 8 hours.
Varies by venue and asset. Hyperliquid offers up to 50x on liquid majors (BTC, ETH) and 20-30x on smaller pairs / equity perps. Binance Futures goes up to 125x on BTC. Higher leverage tightens the liquidation cushion proportionally — at 50x, a 2% adverse move liquidates the position.
Three use cases. (1) Directional exposure with capital efficiency — hold a 5x BTC perp instead of buying spot, free up the rest of the capital. (2) Hedging — short a perp to offset spot exposure without selling the underlying. (3) Carry strategies — short the perp when funding is heavily positive, hedge with spot, collect funding while market-neutral. The funding-carry strategy template walks through the third in detail.
The mechanism that anchors perp prices to spot. How positive/negative funding tells you about market positioning.
How leverage and liquidation work together — formula, examples, risk management.
The perpetual format applied to US equities — 24/7 trading of NVDA, TSLA, AAPL, S&P 500.