Perpetual futures
In short Perpetual futures are leveraged contracts that track a crypto's price with no expiry date, kept close to spot through regular funding payments.
A perpetual future, or perp, is a derivative that lets you bet on a coin's price going up (long) or down (short) without owning the coin. Unlike traditional futures, it never expires, so you can hold the position as long as you keep enough margin. Perps are the most traded product on many centralized exchanges and on decentralized perp platforms.
To keep the perp price close to the spot price, exchanges use a funding rate. When perps trade above spot, longs pay shorts at set intervals, often every eight hours or hourly; when they trade below, shorts pay longs. You post collateral, called margin, and can use leverage. If the price moves against you far enough that your margin falls below the maintenance level, the position is liquidated.
For small token holders, perps matter even if you never trade them. When a coin gets a perp listing, traders can short it easily, and crowded leveraged positions lead to cascades of liquidations that cause sharp wicks in the spot market too. Funding rates also act as a sentiment gauge: high positive funding means many traders are leveraged long.
The traps are leverage and costs. At 20x, a move of roughly 5% against you can wipe out the position, and liquidation prices sit closer than many expect once fees are counted. Funding is paid for as long as the position is open and can eat a trade that goes sideways. Check whether the exchange uses isolated or cross margin, and how it marks prices for liquidation.