Perpetual Futures
A derivative contract tracking an asset's price with no expiry date, kept near spot price via a funding rate mechanism.
Perpetual futures (perps) are derivative contracts that allow traders to take leveraged long or short positions on an asset without an expiry date. They track the underlying spot price via a funding rate: when longs outweigh shorts, longs pay shorts a periodic fee, incentivising the price to converge to spot.
Perps have become the dominant crypto trading instrument by volume, with billions of dollars traded daily on exchanges like Binance, Bybit, and dYdX (on-chain). They allow sophisticated hedging and directional speculation without the complexity of rolling expiry contracts.
The funding rate is a key market sentiment indicator: persistently positive funding means the market is net-long and overleveraged bullishly; persistently negative funding signals bearish positioning.