DeFi Market
A perpetual future is a bet on a coin's price that never expires. You put down a slice of the money as margin, borrow the rest from the exchange, and hold the position for as long as you like. What keeps its price glued to the real coin is a small payment between buyers and sellers every few hours, called the funding rate. That payment, and how fast leverage can wipe you out, are the two things to understand before you touch one.
How perpetual futures work
An ordinary futures contract has an end date. On that date it settles at the market price, so its price is pulled toward the real thing as the date gets closer. A perpetual has no end date, so it needs a different way to stay honest.
That way is funding. Every eight hours on most exchanges, the two sides of the trade pay each other. If the perpetual is trading above the coin's spot price, the people betting on a rise (longs) pay the people betting on a fall (shorts). If it trades below, shorts pay longs. Paying to hold the popular side makes it less popular, and the price drifts back toward spot.
Leverage, margin and liquidation
The second half of a perpetual is leverage. You don't pay for the whole position. You post margin, and the exchange lends you the rest. Kalshi's own help page gives the plainest example I've seen: put up $100 at 5x and you control $500 of bitcoin. A 10% rise makes you $50, half your money again. A 10% fall loses $50. A 20% fall loses all $100.
You rarely get to ride that 20% fall to the bottom. Before your margin hits zero, the exchange closes the position for you. That's a liquidation, and it's automatic. At 6x, Kalshi says a 17% move against you can wipe out the margin. Offshore exchanges advertise leverage many times higher than that, where a move of a few percent is enough.
The biggest day on record came almost exactly a year ago. On 10 and 11 October 2025, after a tariff threat against China hit markets, CoinGlass counted $19.13 billion of positions liquidated across 1,618,240 traders in 24 hours. Most were longs. CoinGlass itself said the real figure was probably higher, because Binance reports only one liquidation per second.
⚠ Red flag
An app that leads with its maximum leverage on the sign-up page is selling you the liquidation, not the trade. Liquidations cascade: forced selling pushes the price down, which liquidates the next layer of longs, which pushes it down again. That's why a 10% dip on spot can look like a cliff on a perpetuals chart.
Perpetual futures vs regular futures
| Perpetual futures | Regular (dated) futures | |
|---|---|---|
| End date | None. Hold as long as your margin lasts | Fixed expiry, often monthly or quarterly |
| What keeps the price near spot | Funding payments every few hours | Settlement at expiry |
| Cost of holding | Funding, which can run for or against you | Built into the price gap at the start |
| To stay in | Do nothing | Roll into the next contract before expiry |
| Where most crypto trading happens | Here, by a wide margin | Mostly regulated venues such as CME |
What funding actually costs you
Funding looks tiny because it's quoted per eight hours. Binance's published formula builds in an interest rate of 0.01% for each eight-hour period. Three periods a day for a year, and a long paying that level the whole time gives up about 11% a year, before trading fees. In a hot market funding can run far higher than the default, and every exchange sets its own cap. Kalshi caps it at 2% per period.
Funding can also pay you. When the crowd is short, shorts pay longs. Some traders hold a coin and short the same amount on a perpetual purely to collect funding. That only works while funding stays positive, and it carries its own exchange and liquidation risk.
Rob's take
Perpetuals do more of crypto's trading than spot does, by more than three to one. That tells you who sets the price on a bad day: leveraged traders being closed out by a machine. If you only ever buy and hold, you still need to know how perps work, because their liquidations are the reason your coin can fall 15% in an hour and bounce back by lunch. If you're new, the right amount of leverage is none.
How perpetual futures work on Kalshi and Coinbase
For years, perpetuals were offshore products that US residents couldn't legally use. That has changed fast.
- Coinbase launched what it calls "perpetual-style" futures for US customers on 21 July 2025, starting with small bitcoin and ether contracts and up to 10x leverage. They're perpetual in practice, but technically each contract runs for five years so it fits US futures rules.
- Kalshi, the prediction market, announced its move into perpetuals on 29 May 2026 as the first US company cleared to offer them, and its crypto perps passed $1 billion in volume within a week. Its help page lists leverage of up to 6x, funding every eight hours at midnight, 8am and 4pm Eastern, and isolated or cross margin. It has since added gold and silver, and on 6 October 2026 a perpetual on a US 500 stock index.
The mechanics on both are the ones above: margin, funding, liquidation. The difference is the rulebook. Both sit under the US futures regulator, the CFTC, with lower leverage limits than the offshore giants. Lower leverage means a bigger move before you're closed out. It doesn't mean the position can't go to zero.
Before you open one
- Know your liquidation price before you click, not after. Every exchange shows it.
- Use isolated margin if you're learning, so one bad trade can't drain the rest of your account.
- Check the funding rate and which way it's running. Holding the crowded side costs money every eight hours.
- Size it so a liquidation wouldn't hurt. If losing the margin would hurt, the position is too big.
Perps are also the plumbing behind a lot of what moves the market. For the bigger picture, read what moves bitcoin's price and how to read a market cycle. Most margin is posted in dollar tokens, so how stablecoins work matters here too.