Perpetual futures are different from traditional futures contracts. This guide covers how perpetual futures work, how to trade them – plus, how traders can use these instruments to access commodities and indices with continuous market exposure.
Perpetual futures (also known as perpetual swaps or ‘perps’) are financial derivatives that give traders exposure to the price of an underlying financial asset (e.g., commodities or stocks). Unlike traditional futures contracts, which have a set maturity date, perpetual contracts don’t have an expiration date. This means that traders can hold their positions indefinitely – as long as margin requirements are met.
It’s important to note that the contract represents price exposure rather than physical ownership of the asset. In other words, participants trade a contract that tracks the asset's price.
First theorised by economist Robert Shiller in 1993, these contracts were designed to create liquid markets for assets that are otherwise difficult to trade.
The first successful commercial implementation of these swaps for digital assets occurred in May 2016. Today, they’re a foundational part of the global derivatives market. In the United States, they’re generally classified as swaps under the Commodity Exchange Act (CEA) and are subject to oversight by the Commodity Futures Trading Commission (CFTC).
To understand how perpetual futures work, you must look at the ‘engine’ that keeps the contract tethered to real market values. Unlike traditional futures contracts that settle at expiry, perpetuals use a continuous feedback loop called the ‘funding rate’ to ensure the price aligns with the underlying spot price.
Every 8 hours (or hourly on some venues), the platform checks the price difference between the contract and the actual market. If the contract price is higher, buyers pay a fee to sellers. This payment encourages traders to take the opposite side, which helps pull the contract price back in line with the market value.
Specialised traders, known as arbitrageurs, help keep prices accurate. They enter positions specifically to collect funding payments, which creates the buying or selling pressure needed to close price gaps. This constant rebalancing is why the market can stay open 24/7 without ever needing a final expiration date.
While the funding rate is the core mechanic, the process of how to trade perp futures relies on several structural components:
While both perpetual and traditional futures contracts can be used for speculation and hedging, the distinction between them is significant for a longer-term strategy. Traditional futures contracts have predefined expiration dates (often monthly or quarterly) where the contract must be settled or ‘rolled over’ to a new period.
Rolling a traditional contract often incurs rollover costs and price slippage. Perpetuals are structured to reduce the frictions associated with contract rolls because they never expire. Instead of a one-time settlement, perpetuals utilise the continuous funding rate mechanism to maintain price alignment.
Traditional contracts are frequently used by producers or consumers for the physical delivery of commodities. In contrast, perpetuals are primarily used for flexible price exposure and capital-efficient hedging. They offer a spot-like experience while providing the advanced features of a derivatives market.
If you want to access perpetual futures contracts, you have to use a regulated venue. Here’s how you can start trading perps with us.
Download the Crypto.com Exchange app from the App Store or Google Play. Then, complete the standard identity verification (KYC) process to ensure your account meets regulatory standards for derivatives trading.
Note: The Crypto.com Exchange app isn’t the same as the standard Crypto.com App – make sure you download the correct one.
Navigate to the ‘Derivatives’ or ‘Trading’ section in the app. If you’re a new user, you may need to enable these features by reviewing and accepting the relevant membership agreements and disclosures.
Fund your account using your preferred method (e.g., debit/credit card or bank transfer) to start trading perpetual contracts. All of these contracts are USD-settled, which means that margin, profits and losses are calculated and paid in US dollars.
Once your account is funded, you can use the search function to find specific tickers for the markets you want to enter.
Review the contract details, including the current funding rate and margin requirements. Choose your leverage rate and decide whether to go long or short based on your market outlook. Review your order carefully before confirming the trade and always manage your risk by monitoring the position closely.
Access precious and industrial metals with 24/7 liquidity. This is designed to address ‘weekend gap risk’ where prices move while traditional markets are closed. Available contracts include:
Trade on the volatility of global energy supplies without the complexity of physical settlement. Contracts include:
Gain broad exposure to US equity markets. These contracts track the performance of leading benchmarks:
What happens if a perpetual future has a positive funding rate?
A positive funding rate means the contract price is higher than the spot price. In this scenario, traders holding long positions must pay the funding fee to those holding short positions.
Can I hold a perpetual contract forever?
Yes, a position can theoretically be held forever. There’s no expiration date, but you must make sure your account maintains enough capital to meet ongoing margin requirements and funding payments.
Do I own the underlying asset when trading perpetuals?
No, the contract represents price exposure rather than physical ownership of assets like gold, oil or individual stocks. You’re trading a derivative contract that tracks the price of the asset.
Important information: This article is provided by Crypto.com for informational and educational purposes only. Nothing contained in this article constitutes, or is intended to constitute, financial advice, investment advice, trading advice, legal advice, tax advice, or any other form of professional advice or recommendation. The information presented herein should not be relied upon as a basis for making any financial, investment, or trading decisions.
Trading perpetual contracts, futures, options, and other derivatives—including the use of margin and leverage—involves a high level of risk and may not be suitable for all users. You may lose all or more than your initial margin, and losses can occur rapidly due to volatility, leverage, or adverse market conditions. The use of leverage amplifies both potential gains and potential losses, and you should not trade with capital you cannot afford to lose. Liquidation may occur if maintenance margin requirements are not met, and funding rates, settlement mechanisms, expiry conditions, or pricing mechanisms may vary between instruments and trading sessions. Past performance is not indicative of future results, and no representation or warranty is made regarding future performance.
Readers should conduct their own independent research and due diligence and consult with qualified financial, legal, or other professional advisors before making any trading or investment decisions. You are solely responsible for evaluating the merits and risks associated with the use of any information, product, or service described in this article.
Cryptocurrency and derivative markets are subject to high volatility, regulatory uncertainty, and operational risks including, but not limited to, exchange outages, smart contract vulnerabilities, counterparty risk, and changes in applicable law or regulation. Product availability and leverage limits are subject to jurisdictional restrictions and applicable Terms and Risk Disclosures. Services, features, and other benefits referenced in this article may be subject to eligibility requirements and may change at the discretion of Crypto.com.
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