Crypto Futures vs. Perpetuals: Key Differences Explained
In the dynamic world of cryptocurrency trading, “futures” and “perpetuals” are two of the most popular instruments for speculators and hedgers. While often discussed together, they are distinct products with crucial differences. Both allow traders to bet on the future price of a cryptocurrency without actually owning it. [1][2]
What are Crypto Futures?
A crypto futures contract is a standardized legal agreement to buy or sell a specific cryptocurrency at a predetermined price on a specified date in the future. [3][4] Think of it as a bet between two parties on what the price of an asset, like Bitcoin or Ethereum, will be at expiration. [4]
Key Characteristics of Traditional Crypto Futures:
- Expiration Date: This is the defining feature. Each contract has a fixed lifetime and will expire on a set date. [3] Upon expiration, the contract is settled, typically in cash, based on the difference between the contract price and the market price. [5]
- Standardized Contracts: Futures contracts have uniform terms, such as the contract size (e.g., 5 BTC) and the minimum price fluctuation, known as a tick. [3][6]
- Settlement: When the contract expires, the “loser” of the bet pays the difference to the “winner.” [4] For example, if a trader goes long (bets the price will rise) and the price does increase by the expiration date, they profit. Conversely, if the price falls, they incur a loss. [4]
- Hedging and Speculation: Investors holding cryptocurrencies can use futures to hedge against potential price drops by taking a short position. [3][7] Speculators use them to profit from price volatility in either direction. [4][7]
What are Crypto Perpetuals?
Perpetual futures, often called “perpetuals” or “perps,” are a type of futures contract unique to the cryptocurrency market. [1][8] First introduced by the exchange BitMEX in 2016, they have become exceedingly popular. [9][10] The key innovation of a perpetual contract is that it does not have an expiration date. [9][11]
Key Characteristics of Crypto Perpetuals:
- No Expiration Date: This is the most significant difference from traditional futures. Traders can hold their long or short positions indefinitely, as long as they maintain sufficient collateral (margin) in their account. [1][11]
- Funding Rate Mechanism: To ensure the perpetual contract’s price stays closely aligned with the underlying cryptocurrency’s spot (current market) price, a unique mechanism called the “funding rate” is used. [1][9] This involves periodic, small payments exchanged between traders holding long and short positions. [10][12]
- If the perpetual price is higher than the spot price (trading at a premium), long position holders pay a fee to short position holders. This incentivizes traders to open short positions, helping to drive the contract price down towards the spot price. [1][13]
- Conversely, if the perpetual price is lower than the spot price (trading at a discount), short position holders pay the longs. This encourages long positions, pushing the contract price up. [13]
- Continuous Market Access: Because crypto markets operate 24/7, perpetuals allow traders to open and close positions at any time, offering greater flexibility than traditional markets. [14]
Key Differences at a Glance
| Feature | Traditional Crypto Futures | Crypto Perpetuals (Perpetual Futures) |
|---|---|---|
| Expiration Date | Yes, has a fixed expiration and settlement date. [3] | No, can be held indefinitely. [9][11] |
| Price Anchor | Price naturally converges to the spot price as the expiration date nears. | Uses a funding rate mechanism to keep the contract price tethered to the spot price. [1][14] |
| Fees | Standard trading fees. | Standard trading fees plus the periodic funding rate payments/receipts. [10] |
| Management | Positions must be closed or “rolled over” to a new contract before expiration to maintain exposure. | No need to roll over positions, offering more straightforward long-term exposure. [14] |
Shared Concepts: Leverage and Margin
Both traditional futures and perpetuals are typically traded with leverage. This allows a trader to open a large position with a relatively small amount of capital, known as margin. [7][14] For example, with 10x leverage, a $1,000 deposit can control a $10,000 position. [14] While leverage can amplify profits, it equally magnifies losses, making these instruments high-risk, especially given the volatility of cryptocurrencies. [3][15] If a trade moves against a user and their margin depletes, the exchange can forcibly close the position in a process called liquidation. [13]
In summary, while both futures and perpetuals are derivative products used for speculating on crypto prices without owning the asset, the primary distinction lies in the expiration date. Traditional futures have a set lifespan, while perpetuals, through their unique funding rate mechanism, can be held forever, offering traders continuous and flexible market exposure. [1][9]
Learn more:
- What are Crypto Perpetuals and How Do You Trade Them? – Backpack Learn
- Cryptocurrency Futures: Definition and How They Work on Exchanges – Investopedia
- Cryptocurrency Futures: Definition, How to Trade, & Risks | Britannica Money
- What are Crypto Futures Contracts? | Kraken
- Best Crypto Futures Trading Platforms in 2025 – CryptoDnes.bg
- Introduction to Crypto Futures
- What are crypto futures? – Robinhood
- What are Perpetual Futures? & How They Work – Gemini
- Perpetuals Explained – Bitcoin.com | Markets
- What are perpetual futures contracts? – Kraken
- Differences Between a Perpetual Contract and a Traditional Futures Contract – Medium
- Perpetual Futures Contracts and Cryptocurrency Market Quality
- What’s the Difference between Futures Contracts and Perpetual Swap Contracts? – BitMart
- What are Perpetual Futures? – Coinbase
- Perpetual futures – Wikipedia