Perpetual futures

Perpetual futures, also called perps or perpetual swaps, are derivatives that track an asset’s price like ordinary futures but never expire. In place of a settlement date, a payment known as the funding rate passes between buyers (longs) and sellers (shorts) every few hours and keeps pulling the contract toward the spot price. The exchange keeps none of it.

From Shiller’s 1993 paper to BitMEX’s XBTUSD

The name is older than crypto. Yale economist Robert Shiller proposed “perpetual futures” in a November 1992 discussion paper, published in the Journal of Finance in 1993, to price hard-to-trade assets such as houses through daily cash settlement on rent or dividend indices. His design had no funding rate, so it is an ancestor, not a blueprint.

The contract traders know arrived in May 2016, when BitMEX, co-founded by Arthur Hayes, listed its XBTUSD perpetual swap. Who came first is disputed: secondary accounts credit Alexey Bragin with an inverse perpetual paying funding, designed for the ICBIT exchange in 2011. BitMEX made the format famous, then closed for good in September 2026.

How perpetual futures work, step by step

1. The venue computes an index price, an average of spot prices from several exchanges, and a mark price, a fair-value estimate used for margin checks so one thin order book cannot trigger liquidations.
2. The trader posts margin: position value divided by leverage. $1,000 opens a $10,000 position at 10x.
3. Funding is settled at set times, every eight hours by default on Binance (00:00, 08:00 and 16:00 UTC), according to its funding rate FAQ. The rate blends a premium index with an interest component of 0.01% per eight hours. Positive, longs pay shorts; negative, shorts pay longs. Only positions open at that moment pay or receive.
4. When equity drops below the maintenance margin, the venue closes the position, as our glossary entry on liquidation explains.

Hyperliquid runs a shorter clock: funding every hour at one eighth of the eight-hour rate, capped at 4% an hour. Linear perps settle in dollars or stablecoins. Inverse perps such as XBTUSD are margined in the coin, which makes the payoff non-linear: a long is liquidated faster on a fall than a short on an equal rise.

A $10,000 long: funding cost and liquidation distance

A hypothetical illustration, not a forecast or any exchange’s real terms: a trader holds a $10,000 long with eight-hour funding. At the baseline 0.01%, each payment is 10,000 × 0.0001 = $1. Three a day make $3; over 365 days, $1,095, or 10.95% of the position. In a crowded market at 0.05%, it is $5 every eight hours.

Now the exit point. Entry is $82,000, so $10,000 buys 0.12195 BTC, and maintenance margin is 1.25% of the position’s value (about $125 at entry), Hyperliquid’s level for an asset with 40x maximum leverage. Using the formula in Hyperliquid’s documentation, at 10x: 82,000 − 875 ÷ 0.12195 ÷ 0.9875 ≈ $74,734.

Fees and funding, left out here, bring the real exit a little earlier.

Perps in 2026: Kalshi, Coinbase and a ten-minute wipeout

At the end of May 2026 the CFTC approved a bitcoin perpetual, BTCPERP, on Kalshi, the CFTC-regulated prediction market, CoinDesk reported. A no-action letter the same day let Coinbase Financial Markets offer some perps to US clients through Coinbase Bermuda. CoinDesk noted this is not a formal rule.

On 17 October, between 21:22 and 21:32 UTC, about $51.6 million of perp positions on chip-maker stocks were force-closed, roughly 74% of them longs, per CoinGlass data cited by CoinDesk. Nasdaq was shut, so no live share price anchored the contracts, and the chip contracts fell roughly 6% to 7% at their lows. At 40x, that drop is five times our table’s cushion. Our report on the chip stock perpetuals crash has the minute-by-minute detail.

Risks and limits of perpetual futures

Funding costs money when the market leans one way, and it can flip sign. The mark price, not the last trade, decides margin calls. On Hyperliquid, if equity falls below two thirds of the maintenance margin, a liquidator vault takes the position and the trader loses that margin. Venues can be hacked or shut down. None of this is investment advice.

EU rules treat many perps as CFDs

In a statement of 24 February 2026, ESMA said derivatives sold as perpetual futures, bitcoin ones included, are likely to fall under national CFD product-intervention measures, whatever the label. Those national rules, which follow ESMA’s 2018 measures, cap retail leverage on crypto at 2:1 for clients of EU providers, close positions at 50% of required margin and add negative balance protection. It is a reminder, not a new rule, and is silent on non-EU venues.

Perpetual futures: questions readers ask

How is the funding rate calculated?

On Binance, the rate is the average premium index plus the interest rate minus that premium, the difference clamped between −0.05% and +0.05%, then scaled to the funding interval. The interest part is 0.01% per eight hours. Each payment is the position value at mark price times the rate.

What is the difference between perpetual futures and regular futures?

A regular future settles on an expiry date, where it meets the spot price. A perpetual has none and can be held as long as the margin lasts. Funding does the expiry date’s job of keeping the contract near the index, and those payments add up the longer a position stays open.

Can you trade perpetual futures on Kalshi?

Yes, in the United States. The CFTC approved Kalshi’s bitcoin perpetual at the end of May 2026. Kalshi keeps perps margin apart from the prediction-market balance and closes a position when that balance drops below maintenance margin. Its help pages gave no leverage cap or funding interval in October 2026.

Are perpetual futures the same as CFDs?

Not by name, but often by law in the EU. ESMA said in February 2026 that derivatives marketed as perpetual futures are likely to fall under national CFD measures. Those rules limit retail clients of EU providers to 2:1 leverage on crypto. Outside the EU, it depends on the country and the venue.