Crypto Definitions

What Are Perpetual Futures in Crypto and How Does Funding Work?

By Ben Simpson, Founder of Collective Shift. Reviewed by Matt Willemsen, Director of Research. Updated 5 November 2026.

Collective Shift guide cover: What are perpetual futures?

Short answer: A perpetual future, or perp, is a derivative contract that lets traders bet on a crypto price going up or down without owning the coin and without an expiry date. To keep the contract price close to the spot price, longs and shorts swap regular funding payments. Most perps are traded with leverage, which magnifies both gains and losses.

Key points

Perpetual futures track a coin price but never expire.
A funding rate, paid between longs and shorts, keeps the perp price close to spot.
Many exchanges settle funding every eight hours, and some settle hourly.
Leverage means a small price move can wipe out a position through liquidation.

How perpetual futures work

You open a long if you expect the price to rise or a short if you expect it to fall, posting margin as collateral. Because the contract never expires, there is no settlement date to pull its price back to the real market. The funding rate does that job instead.

Who pays the funding rate and how often?

When the perp trades above spot, funding is positive and longs pay shorts. When it trades below spot, funding is negative and shorts pay longs. Payments are made directly between traders, not to the exchange. Many large exchanges settle every eight hours, while some decentralised venues settle every hour, so check the contract page. Our funding rate definition covers the maths.

Perpetual futures vs spot and dated futures

Feature	Spot	Dated future	Perpetual future
Own the coin	Yes	No	No
Expiry	None	Fixed date	None
Keeps price near spot by	Is the spot price	Settlement at expiry	Funding payments
Leverage	Usually none	Common	Common

Leverage and liquidation

With 10 times leverage, a 10 per cent move against you can wipe out your margin. Exchanges close losing positions automatically when margin runs too low, which is called liquidation. Large clusters of liquidations can push prices sharply in one direction for a short time.

Why long term investors still watch perps

Even if you never trade them, funding rates and open interest show how much leverage is building in the market. Crowded leverage has often come before sharp moves. That context helps explain sudden swings, as covered in our guide to crypto trading vs investing.

Frequently asked questions

Is perpetual funding charged daily or hourly?

It depends on the venue. Many centralised exchanges settle every eight hours, three times a day, while some platforms settle hourly.

Who pays the funding rate on a perpetual?

When funding is positive, long positions pay shorts. When it is negative, shorts pay longs.

Do I pay funding if I just buy Bitcoin?

No. Funding only applies to open perpetual futures positions, not to spot holdings.

Are perpetual futures available to Australians?

Some platforms offer them, subject to local rules, and they are complex leveraged products where losses can be rapid.

This guide is general education only and is not personal financial advice. Collective Shift Pty Ltd, ABN 78 650 977 325.

Written by Ben Simpson, Founder of Collective Shift, and reviewed by Matt Willemsen, Director of Research. Published 5 November 2026. Updated 5 November 2026.