Perpetual futures in crypto: how perps work, step by step

Perpetual futures in crypto (perps, perpetual swaps) are leveraged contracts with no expiry date: you can hold a position for as long as your margin lasts. Instead of a settlement date, a funding rate keeps the contract price tied to spot: a periodic payment between longs and shorts. Because perps trade on leverage, the main risk is not where bitcoin goes next but liquidation, when the exchange force-closes a position whose collateral has fallen below maintenance margin.

This guide explains how perpetual futures differ from dated futures, the three prices every perp trader sees on screen, how funding, margin and the liquidation price are calculated, and what all of it looked like on live data on October 28, 2026.

How a perpetual differs from a regular futures contract

A classic futures contract has an expiry. As the date approaches, the contract price converges with the underlying, and positions are settled in cash or delivered. Anyone who wants to stay exposed has to roll into the next contract and pay the spread and fees. A perpetual has no such date: it is marked to market continuously, and the gap between contract and spot is closed by funding.

For how the basis on dated contracts works and why it differs from funding, see our guide to CME futures and contango.

Where perpetuals came from

The first bitcoin perpetual swap was launched by BitMEX. In its announcement of May 13, 2016, the exchange described XBTUSD as a way to trade the bitcoin/dollar rate with up to 100x leverage and no expiry, where longs and shorts "receive or pay interest each day" based on the Bitfinex lending market. The design worked so well that perpetuals pushed dated contracts off most crypto exchanges. XBTUSD itself lived ten years: according to a BitMEX notice, the contract was set to reduce-only mode on September 10, 2026 and was settled and delisted on September 16, 2026 at 12:00 UTC as part of the exchange's closure.

The scale of the market is laid out in CoinGecko's State of Crypto Perpetuals Report 2026: the 11 largest centralized perp exchanges averaged $4.69 trillion in monthly volume in January–April 2026, down from $7.11 trillion a month in 2025, with Binance at 33% of volume and OKX at 15%. The 12 largest decentralized perp exchanges averaged $611.57 billion a month over the same period, and the DEX-to-CEX volume ratio stood at 10% in April 2026 after peaking at 13% in late 2025.

In the US, perpetuals long existed only outside the regulatory perimeter. On May 29, 2026 the CFTC approved the BTCPERP contract submitted by KalshiEX. According to the order, it is a cash-settled contract on the spot price of bitcoin as measured by the CF Benchmarks BRTI index, trading in units of one ten-thousandth of a bitcoin, 24 hours a day, seven days a week, with an "indefinite (or 'perpetual') term" and "a periodic funding mechanism" to maintain convergence with the reference price.

Three prices on screen: last, index and mark

Beginners watch one number, the last trade in the perp order book. The exchange tracks three:

1. Last price is the price of the most recent trade in the contract. Realized profit and loss is booked at this price.
2. Index price is a weighted spot price of the asset across several exchanges. Per Binance's documentation, the index draws on quotes from Binance, OKX, Coinbase, Kraken, Bybit, Bitget and other venues; a source that deviates more than 3% from the median is capped, and one that has not updated in five minutes gets zero weight.
3. Mark price is the price used for unrealized PnL and liquidation. On Binance it is the median of three values: the index adjusted for funding, the index plus a 30-second moving average of the basis, and the contract's last price.

Why the complexity? So that a brief wick in one exchange's order book does not liquidate positions. If someone slams the last price down 5% with a single market order, the index and mark price barely move, and positions with a margin buffer survive. Under Binance's liquidation rules, liquidation is triggered only when the mark price reaches the position's liquidation price.

On October 28, 2026, at 4:00 AM ET, our Binance data showed a BTC index price of $81,082 and a BTCUSDT perp mark price of $81,065: the contract traded $17, or 0.02%, below spot. Live values are in the Market Pulse block.

Funding: how a perp stays pinned to spot

The funding rate is a payment between traders, not an exchange fee. When the perp trades above the index, the rate is positive and longs pay shorts; when it trades below, shorts pay longs. On Binance, per its rules, funding is settled every 8 hours and the fixed interest component is 0.01% per interval. Hyperliquid computes its rate on the same 8-hour basis with the same 0.01% interest component, but pays one eighth of it every hour and caps funding at 4% per hour.

The payment equals the rate times the position's notional value. At the 0.00789% per 8 hours that Binance showed on October 28, 2026 at 4:00 AM ET, a 1 BTC long with a notional of $81,082 paid shorts $6.40 per interval, about $19 a day. Annualized, that is 8.64%; at the same moment Bybit, OKX and Hyperliquid showed 0.01% per 8 hours, or 10.95% a year. For how to read funding and annualize it, see our funding rate guide.

Margin, leverage and liquidation: a worked example

Leverage does not create money. The exchange lets you open a position larger than your collateral, and the collateral acts as a buffer against losses. Three numbers matter:

1. Initial margin is the collateral needed to open. At 10x leverage it is 10% of notional.
2. Maintenance margin is the minimum below which the position is closed. On Hyperliquid, per its docs, it is half the initial margin at maximum leverage: from 1.25% for assets with up to 40x leverage to 16.7% for assets with up to 3x. Binance stresses that maintenance margin "is always calculated in the same way, regardless of what leverage you select" and depends on position size, not on the leverage chosen.
3. Liquidation price is the mark price at which collateral plus unrealized PnL falls to the maintenance margin.

A worked example on October 28, 2026 data. A trader opens a 1 BTC long at $81,082 with 10x leverage on a venue where BTC maintenance margin is 1.25% of notional:

• initial margin: $8,108;
• maintenance margin: about $1,014;
• loss allowed before liquidation: $8,108 − $1,014 ≈ $7,094;
• liquidation price: roughly $73,990, or 8.7% below entry.

This is simplified: it ignores fees and funding, which chip away at collateral every day. A single $6.40 funding payment looks trivial, but over a month at the same rate it adds up to about $580, or 7% of initial margin.

At liquidation the exchange closes the position itself. On Binance, whatever collateral remains after the liquidation clearance fee goes back to the trader; if the position has gone deeper into the red than the collateral, the insurance fund absorbs the loss, and if the fund cannot cover it, auto-deleveraging (ADL) kicks in, force-closing part of the profitable positions on the other side. On Hyperliquid the system first tries to close the position with market orders in the book, and if account equity drops below two thirds of maintenance margin, the position is handed to the liquidator vault. For why liquidations cascade and take out stops, see our liquidations guide.

What it looked like on October 28, 2026

A snapshot of the BTCUSDT perpetual on Binance from our data at 4:00 AM ET:

What that said about the market that day: the perp traded slightly below spot, funding was positive but moderate and about twice the 30-day average, and open interest had edged down over the week. That is a market without obvious one-sided overheating. For how to read open interest together with price, see our open interest guide.

Where perpetuals trade

• Centralized exchanges. The bulk of volume: per CoinGecko, Binance and OKX together held 48% of perp volume on the largest CEXs in January–April 2026. You hand your collateral to the exchange and rely on its index, insurance fund and liquidation rules.
• Decentralized exchanges. The largest is Hyperliquid, with its own chain and on-chain order book. Collateral stays in your wallet and margin and funding rules are written in code, but oracle or smart-contract failures land on the trader too.
• Regulated venues. With the CFTC's BTCPERP order of May 29, 2026, a bitcoin perpetual gained futures-contract status on a US exchange with a central counterparty; the CFTC limited its analysis to the BTCPERP contract and "similarly structured" perpetuals on digital commodities with deep spot markets.

If you are choosing a venue for the first time, start with our guide to choosing a crypto exchange: licensing, reserves and availability in your country matter more than the maximum leverage on offer.

Common mistakes

• Watching the last price instead of the mark price. Liquidation and unrealized PnL are calculated on the mark price. A wick in the book does not necessarily liquidate you; a steady move in the index does.
• Confusing leverage with risk. 10x leverage on 10% of your account and 2x on the whole account are the same notional but a different distance to liquidation. Measure the distance to your liquidation price in percent, not the multiplier.
• Forgetting funding. On long-held positions, 0.01% per 8 hours becomes 10.95% a year. During extended positive funding, a long pays simply for the right to stay in.
• Running cross margin unattended. In cross mode the whole balance is collateral, and one position can drag the others down. Isolated margin caps the loss at that position's collateral.
• Trusting the maximum leverage. At 100x, a 1% move against you wipes out the entire collateral. Such positions live for minutes.

FAQ

Is a perpetual the same as a perpetual swap? Yes. BitMEX called its 2016 product a "perpetual swap"; exchanges later switched to "perpetual futures" or just "perps". The mechanics are the same: no expiry, periodic funding.

Can you hold a perp for years? Technically yes, as long as collateral stays above maintenance margin. Economically it costs funding: at 0.01% per 8 hours, about 11% a year, and in overheated periods the rate can run several times higher.

Does the exchange collect funding? No. On Binance and Hyperliquid, payments go directly between holders of long and short positions. The exchange earns trading fees and the liquidation fee.

How is a perp on a regulated exchange different? The mechanics are the same: index, funding, margin. The difference is infrastructure: clearing through a central counterparty, regulatory oversight and margin rules set out in the contract specification. The CFTC's BTCPERP order describes exactly that design.

This is not investment advice.