What are perps, anyway? Everything you need to know about crypto’s hottest trading instrument
Perpetual swaps are the dominant crypto derivatives product, with annual volume estimated at $40–50 trillion. They give traders leveraged exposure to bitcoin or ether without owning the asset and avoid the expiry problem of traditional futures. Early crypto futures often traded at a premium to spot and forced traders to roll positions repeatedly. BitMEX introduced the perpetual swap in 2015 to solve this by removing expiration entirely. Without expiry, perps rely on a funding rate paid every eight hours between longs and shorts. If the perp trades above spot, longs pay shorts; if below spot, shorts pay longs. This encourages the contract price to stay near spot and lets market makers arbitrage deviations by shorting perps and buying spot. Perps also allow high leverage, sometimes up to 100x, so exchanges use automatic liquidation systems to close risky positions before losses exceed margin. Today, perps are the main venue for crypto price discovery and may influence derivatives on traditional assets as well.
