Perpetual futures: A crypto-driven force reshaping global markets

The future no longer has a “sell-by” date. That’s the idea behind perpetual futures, a fast-growing new type of derivative that never expires. Also known as “perps” or “perpets,” perpetual futures differ from their traditional forebears in at least one key way: they have no delivery or expiration date, meaning a contract or position could, in theory, be carried forever. Currently, most perps are tied to cryptocurrencies. Although they first emerged offshore, they’ve recently begun trading in the U.S. for certain institutional participants. 

The mechanics behind perpetual futures aren’t complicated, but they reshape some of the core ideas behind how futures markets manage time and risk. Current U.S. regulations generally require defined settlement and delivery terms, but perps challenge that structure. They could eventually influence how futures markets evolve.

What are perpetual futures and how do they work?

Perpetual futures are similar in some ways to traditional futures contracts, which allow traders to speculate using borrowed money—called “margin” or “performance bonds” in futures circles—on prices for commodities such as crude oil, gold, and soybeans, as well as on interest rates and equity indexes. In contrast, perpetual futures have no expiration date and trade 24-7, which could allow traders to hold a position indefinitely.

Rather than compelling traders to “roll” a futures position into the next month as its expiration nears, the perp futures market keeps prices lined up with the underlying asset through “funding rates,” a periodic payment between long (bullish) position holders and shorts (bearish). The no-expiration feature “makes perpetual futures highly attractive to experienced traders who wish to avoid the restrictions of contract expiration typically associated with futures trading,” according to Coinbase (COIN), a U.S.–based crypto exchange that lists perpetual contracts.

 Where are perpetual futures traded?

With perpetual futures growing sharply—daily global trading volume exceeded $187 billion in 2025, according to CoinDesk Research—exchanges in the U.S. and elsewhere are angling for a piece of the action.

In July 2025, Coinbase launched perpetual futures contracts based on Bitcoin and Ethereum, the two most actively traded cryptocurrencies. (The launch followed a formal sign-off earlier in the year from the Commodity Futures Trading Commission, the U.S. futures regulator.)

In November 2025, the derivatives arm of Singapore Exchange launched Bitcoin and Ethereum perpetual futures, and the following month, Chicago-based Cboe launched perpetual futures linked to both cryptocurrencies.

One key to perp futures: The funding rate

The funding rate is central to how perpetual futures function. It’s the built-in mechanism that keeps the contract’s price tethered to the underlying asset’s spot price—essentially the engine that substitutes for the daily variation-margin-and-settlement process used in traditional futures. Instead of a clearinghouse marking positions to market once a day, exchanges collect and distribute periodic “funding payments” directly between traders.

The rate itself is calculated using a formula that factors in how far the perpetual contract trades above or below the spot price, plus an interest rate component. Forex traders may recognize this element as similar to the rollover rate in currency trading, where interest rate differentials are reflected in the cost of holding a position overnight.

When a perpetual futures contract trades at a premium to the spot price, traders holding long positions pay those holding shorts. When it trades at a discount, shorts pay longs. Most exchanges calculate and settle these payments about every eight hours to keep prices aligned with spot levels.

To prevent extreme rates during periods of high volatility or low liquidity, exchanges also set limits (called “clamps”) that cap the premium portion of the formula within a narrow range, typically between -0.05% and +0.05%. Clamps help stabilize funding costs and prevent the kind of runaway payment levels that could trigger a forced liquidation (similar to a “margin call” in futures trading) or other market disruption.

Here’s a simplified example using a 0.06% funding rate: A trader with a $100,000 long Bitcoin position pays $100,000 × 0.06%, or $60, to a trader with a $100,000 short Bitcoin position (see sidebar).

Perpetual futures backstory and crypto connection

Perpetual futures emerged early in the mid-2010s, and the market’s growth tracks closely with that of crypto in general. As with other recent innovative—and often speculative—financial products such as prediction markets, early development happened in less-regulated offshore exchanges. In 2016, one of the first perp contracts was launched by BitMEX, a crypto exchange incorporated in the Republic of Seychelles.

As of late 2025, perpetual futures now account for more than 90% of global crypto derivatives trading volume, with around $80 billion changing hands daily, according to crypto data consolidator CoinMarketCap. Along with Coinbase, other crypto exchanges that offer perpetual futures include Binance and Kraken.

Perpetual futures and margin requirements

Like traditional futures contracts, perpetual futures are traded with margin, or leverage, which can amplify both gains and losses. That makes these contracts particularly risky compared to many other asset classes, such as stocks and bonds. If a position’s equity falls below a certain threshold, it could trigger a margin call—a request from the broker to add funds to the trader’s account or face potential liquidation of the position.

For perpetual futures, initial margin requirements typically range from 1% to 20% of the position value, depending on the underlying asset’s volatility and the exchange’s risk parameters. Coinbase’s perp contracts can be traded with up to “10x intraday leverage,” meaning a trader could hold a position worth 10x their own capital by using margin provided by the exchange. For example, a trader who puts down $1,000 could potentially hold a position valued at $10,000, provided it’s opened and closed on the same day.

The bottom line

Perpetual futures, like the cryptocurrencies to which the contracts are linked, have been heralded by proponents as one of the latest innovations fueling a shift toward a more efficient, flexible, and “democratic” global financial system. That may be true. But like traditional futures contracts, perpetual futures pose unique risks and may be unsuitable for many individual investors.

Still, their explosive growth says as much about crypto traders’ comfort with volatility, leverage, and risk as it does about innovation, making perpetuals an interesting corner of the market to watch.

References

• Why Perpetual Futures Matter | business.cornell.edu
• CFTC Permits Listing of Perpetual Futures on BTC and ETH | pillsburylaw.com