What Is Perpetual Swap?
A perpetual swap (or 'perp') is a crypto derivative that lets traders take long or short positions on an asset without holding the underlying. Unlike traditional futures, perps have no expiration date — positions can theoretically be held indefinitely.
Price is tied to the spot index via a 'funding rate': periodic payments between longs and shorts that keep the perp price near spot. When funding is positive, longs pay shorts (perp is trading above spot); when negative, shorts pay longs. Funding rates typically run hourly or every 8 hours.
Perps are the dominant crypto derivative by volume — daily perp volume often exceeds spot volume by 3-5x. Leverage is typically up to 100x on major exchanges, making them both the most popular trading instrument in crypto and the largest source of liquidations. Risk management is essential because perp liquidations are unforgiving.
Related terms
- Leverage — Borrowed capital used to increase trade size beyond what cash alone allows.
- Liquidation — Forced closure of a leveraged position when collateral falls below maintenance margin.
- CEX (Centralized Exchange) — Cryptocurrency exchange operated by a central company that custodies user funds.
- DEX (Decentralized Exchange) — Cryptocurrency exchange that runs on smart contracts without a central operator.