Mention crypto trading to any seasoned trader today, and the conversation inevitably turns to perpetual futures — derivatives contracts that allow participants to control positions far larger than the capital in their accounts. Perpetual futures, commonly called "perps," function much like standard futures contracts, with one critical distinction: they never expire. The instrument was introduced to crypto in 2016 by BitMEX, and within a few years became the dominant venue for leveraged digital-asset trading.

For bitcoin and ether traders, the menu of instruments is broad — spot markets, dated futures, options, perpetuals, and even structured products. For traders of most other altcoins, however, perps may be the only viable derivatives venue. Dated futures for altcoins tend to be deeply illiquid, and spot markets hold little appeal for anyone not planning to hold positions over the long term.

CoinDesk spoke with traders who have built their careers in the perpetual futures market to understand what sets perps apart from other derivatives, how they serve both institutional and retail participants, and what perps trading truly costs.

Their responses were consistent and nearly unanimous. Traders gravitate to perps because of their deep liquidity, low trading fees, and aggressive margin efficiency — the amount of trading exposure obtained per unit of collateral posted. Yet trading fees are not the only cost. Positions held over time incur recurring charges known as funding rates, which function like interest that accumulates the longer a position remains open. The traders CoinDesk spoke with expressed serious concern about how those costs can compound.

Why Perps?

Ask traders why crypto perps average more than $200 billion in daily volume, and they will say it is less a matter of preference than of necessity. The overwhelming majority of that volume flows through offshore exchanges operating with lighter regulatory oversight than venues like CME, which helps explain both the instrument's reach and the structural risks that follow.

Lucas Krenn, a derivatives trader at market-making firm STS Digital who has traded independently for six years, described perps as the infrastructure underpinning virtually everything the firm does.

"Outside bitcoin and ether, dated futures liquidity is thin to the point of being unusable," Krenn said. "So perps are not one tool among several. For a crypto native firm, they are the tool."

Dated futures remain unpopular largely because they must be rolled into new contracts at expiry — a process that incurs costs. The same dynamic explains why futures-based ETFs tend to be less efficient than their spot-based counterparts.

Liquidity refers to the market's capacity to absorb large buy and sell orders at stable prices. According to Krenn, standard dated futures are largely illiquid, meaning a handful of sizable orders can move prices sharply in either direction, increasing slippage — the gap between the price at which a trade is submitted and the price at which it is actually executed — and degrading execution quality.

Kenneth Ong, an independent trader with six years of experience whose activity is concentrated almost entirely in perps, described a similar attraction from a retail perspective. Perps, he explained, offer better fills (orders executed at more favorable prices than expected or than the prevailing market quote at submission), lower fees, and the ability to run both sides of a trade simultaneously through hedge mode. Hedge mode allows a trader to hold long (bullish) and short (bearish) positions on the same token at the same time within the same account. These are maintained as separate positions rather than netted against each other — a notable advantage over regulated venues such as CME, where a single account is typically netted by default.

Ong began in the spot market before shifting almost entirely to perps once he recognized the difference. Spot, for him now, is "for actually holding something long term."

Both Ong and Krenn identified margin efficiency as the fundamental draw. As noted, for most tokens, perps listed across various exchanges are the only real trading venue. While that fragmentation presents challenges, the leverage perps offer — significantly greater than standard futures — enables efficient risk management across multiple venues and tokens. Because perps require only a fraction of a position's value as collateral, the same capital pool can be distributed across a dozen venues while still backing meaningful positions at each.

Perps and Price Discovery

The always-on nature of perps has shifted price discovery so that it occurs the moment news breaks, not merely when traditional markets are open.

Ong experienced this firsthand during the Iran conflict, which flared repeatedly across the first half of 2026. The dynamic emerged during the conflict's opening weekend in late February, when tokenized oil trading on Hyperliquid saw its first major surge in volume.

"That opening weekend, all the real reaction happened on crypto/tokenized commodity perps while the 'official' market was straight up closed," Ong said. "By Monday, a chunk of the repricing already happened somewhere else."

Krenn sees the same mechanism at work in perps tied to other traditional assets. Building a proper tokenized equity product, for instance, is genuinely difficult because it requires recreating the full legal, operational, and regulatory apparatus of traditional share ownership on-chain. A perpetual contract that references the price sidesteps all of that — useful for those looking to trade rather than invest over the long haul.

"That is why the instrument is so powerful and why it keeps spreading into new asset classes," Krenn said.

Both traders expect this "perpification" of various assets to accelerate in the coming years. Ong said that tokenized oil trading over the weekend "is basically a preview" of what is ahead for other commodities. Deepen that liquidity across commodities and equities, and "it kills one of the last reasons to bother with dated futures at all," he said.

The Funding Rate Problem

Ask any crypto trader what is wrong with perps and the answer is usually "liquidations" — the forced closure of long and short positions due to margin shortfalls. According to Krenn and Ong, however, the funding rate deserves greater concern.

A dated futures contract reveals the interest rate cost of a trade upfront. The trader knows precisely what they are committing to. A perpetual futures contract, by contrast, carries a funding rate that fluctuates over time and is typically charged every eight hours. The trader therefore remains exposed to a floating rate for the duration of the position, with no built-in mechanism to lock it in. If the market fails to move as anticipated, that funding cost can become a significant burden.

"It is unquantifiable at the point of trade and unhedgeable afterwards," Krenn said.

Ong was more direct: "That funding's not just some tiny fee you can ignore. It's not. If you hold positions for long periods, it can potentially balloon to the point where a profitable trade loses money."

The Myth of the Safe Trade

Bitcoin's current bear market began with the October 10 crash last year, which triggered widespread deleveraging across both losing and profitable positions. In a sense, it was the inverse of the Federal Reserve's quantitative easing response to past crises, in which liquidity injections lifted both weak and strong assets. On October 10, exchanges socialized losses to protect their own systems. Long positions were liquidated on price — a normal occurrence. Then, profitable shorts were force-closed anyway, because exchange insurance funds could not absorb losses from the other side. Being right and being well-capitalized proved irrelevant, and perpetuals drew heavy criticism.

Krenn, however, said the problem was not inherent to perps.

"It is not a perpetual problem. It is a crypto exchange margin model problem," Krenn said. "Dated futures on those same venues sit behind the same insurance funds and the same deleveraging queue."

"The distinction that matters is not perpetual versus dated [futures]. It is whether you are facing a proper clearing house with a mutualized default fund, or an exchange that socializes losses onto the winners," Krenn added.

Traditional derivatives markets guard against this risk through central clearing counterparties — entities like the CME Clearing House or LCH — which mutualize default losses across all members and maintain dedicated default funds. Most crypto exchanges operate no equivalent structure, relying instead on proprietary insurance funds whose adequacy under extreme stress remains unproven.

The Asymmetry Almost Nobody Prices Correctly

Krenn offered one insight that inverts what most participants assume about perp risk.

"Being long is the structurally safer side," Krenn said.

His reasoning: positive funding is relatively easy to arbitrage away. Anyone holding stablecoins can buy spot, sell the perp, and pocket the spread, thereby compressing positive funding. When the funding rate turns negative, however, the reverse trade — a long position in the perp and a short position in the spot, known as reverse cash-and-carry — is far more difficult to execute. It requires the ability to short the underlying token, which only existing holders can readily do. The challenge intensifies when the circulating supply is small and concentrated.

With arbitrage constrained, the gap between perp and spot prices can persist, meaning funding rates can remain extremely negative for extended periods. Funding rates can also stay extremely high or low for prolonged stretches.

"So the long side has a bounded cost and an unbounded upside. The short side has a bounded upside and an unbounded cost," Krenn explained. "That asymmetry sits in very few risk models."

He pointed to lending protocol Euler's token earlier this year as a case study: a hard run on a listing, a small and concentrated float, and perp funding turning deeply negative — a scenario where shorts were "paying in the region of one percent every four hours" to longs, with almost nobody able to compress it because almost nobody held the token stash.

Takeaway

Perps have effectively democratized futures trading by solving for access, cost, and margin efficiency. They are not, however, without distinctive pain points — most notably the volatile funding-rate exposure that cannot be quantified when a trade is placed and cannot be hedged once it is live.

As Krenn put it: "Until there is a liquid dated curve in crypto, the whole market is carrying an interest rate exposure it cannot price and cannot hedge."

In the meantime, funding remains the tax every participant pays for easy access to this leveraged market.