Perpetual Futures

A perpetual future is a derivative contract that functions similarly to a traditional futures contract but lacks a fixed expiration date. Traders can hold these positions indefinitely without needing to roll over contracts as they approach maturity.

To ensure the price of the perpetual future tracks the underlying asset price closely, a mechanism known as the funding rate is utilized. When the perpetual price deviates from the spot price, traders on one side of the market pay a periodic fee to the other side.

This creates a financial incentive for traders to arbitrage the difference, pulling the perpetual price back toward the spot index. These instruments are widely used in cryptocurrency markets to provide continuous exposure to assets with high leverage.

Because they do not expire, they eliminate the need for contract rollovers, simplifying long-term directional betting. They are the primary liquidity venues for digital asset derivatives.