Crypto Futures, Explained: Perpetuals, Funding and Leverage

Crypto futures let you trade the price of a cryptocurrency — up or down, often with leverage — without ever owning the coin. In crypto, one form dominates: the perpetual future ("perp"), a contract that never expires. This guide explains what futures are, how perps, funding and leverage actually work, and what placing a first trade involves. The hands-on, platform-by-platform steps live in the linked guides.

What are crypto futures?

A future is an agreement about a future price. A crypto future is a contract whose value tracks a coin — say Bitcoin — so you gain or lose as the coin's price moves, without holding any Bitcoin yourself.

Two things make futures different from simply buying:

• You can go short. Going long profits when the price rises; going short profits when it falls. On spot you can only really bet up; futures let you bet either direction.
• You can use leverage. You post a fraction of the position's value as margin, so a small amount of cash controls a larger position. That multiplies your result — in both directions.

Futures vs. spot: what's actually different

The differences come down to four things:

• Ownership — on spot you own the coin; with futures you hold a contract, not the asset.
• Direction — on spot you mainly profit when the price rises; with futures you can profit either way (long or short).
• Leverage — none on spot; available on futures.
• Expiry — none on spot, and none on perps either; only dated futures expire.

Spot is ownership; futures are price exposure. If you just want to hold Bitcoin, spot is simpler and lower-risk. Futures earn their complexity when you want to short or to size a position beyond your cash — at the cost of liquidation risk.

Perpetual futures and the funding rate

A dated future expires and settles on a set day. A perpetual future never expires — so it needs another way to stay tethered to the real market. That mechanism is the funding rate: a small payment exchanged directly between traders (not paid to the exchange) every few hours, commonly every eight.

• When the perp trades above spot, funding is positive and longs pay shorts — nudging the price back down.
• When it trades below spot, funding is negative and shorts pay longs.

Funding is separate from trading fees, and over time it's a real cost of holding a position. We break it down in What is the funding rate? and cover the contract itself in Perpetual futures explained.

Leverage and liquidation

Leverage is the multiplier on your margin. At 10x, a position is ten times your posted margin — so a 10% move against you erases that margin entirely. When losses approach your margin, the exchange force-closes the position at the liquidation price. That's the central risk of futures: you can lose your whole margin (and the position) on a move that would be a minor dip for a spot holder.

A few fundamentals:

• Isolated vs. cross margin. Isolated margin risks only the amount assigned to one position; cross margin backs positions with your whole balance — more resilient to a wick, but a bad trade can reach your entire balance.
• Liquidations use the mark price, an averaged "fair" price, not the last trade — so a single exchange's spike is less likely to liquidate you unfairly.
• Lower leverage is safer. The leverage number is a ceiling, not a target; smaller positions and a stop-loss matter more than a high multiplier.

The full treatment — margin, liquidation price, risk sizing — is in the Leverage & risk hub.

How to place your first futures trade

The flow is similar across reputable venues:

1. Choose a platform and move funds into its derivatives/futures wallet.
2. Pick a market — usually a perpetual like BTC or ETH against a stablecoin.
3. Set leverage conservatively. Start low; you can always size up later.
4. Choose a direction (long or short) and an order type (a limit order avoids paying the taker fee).
5. Set a stop-loss before you enter, and note your liquidation price.
6. Confirm, then monitor — funding accrues while the position is open.

Doing each of those steps on a specific exchange — where the buttons are, what the fees are, how the screens look — is exactly what our platform walkthroughs cover.