What Are Perpetual Futures, and Where Is the Future?

You open an exchange. BTC costs $100,000. You choose Long and 10× leverage. The price rises 2%, and your return on collateral is roughly 20%, before trading fees and fundingPeriodic payments between buyers and sellers of perpetual futures. Buyers pay when the rate is positive; sellers pay when it is negative. This mechanism keeps the contract price closer to the underlying asset price..

That raises a reasonable question: “Where is the future in this? I'm just making or losing money as the price moves.”

The word “futures” is what makes this confusing. Let's start with an ordinary oil contract, then see what was gradually taken out of it.

1. An ordinary future: oil in December for $80

Imagine it is October. You and I agree:

On December 20, I will buy 1,000 barrels of oil from you for $80 a barrel.

The “future” is right there: the transaction happens on December 20, but we agree on the price today. I commit to buying; you commit to selling.

On an exchange, that contract can be traded before December. If oil becomes more expensive, the buyer's position at $80 becomes more valuable. If oil gets cheaper, the opposite happens.

A tanker does not necessarily arrive at the end. Some contracts simply pay out the difference in money. For this explanation, the key point is: an ordinary future has an expiry date.

2. Why the expiry date matters

Switch to bitcoin. Suppose today:

• BTC itself costs $100,000 — its spot price;
• a BTC future expiring in December trades at $105,000.

That gap is possible. Financing a BTC purchase costs money, December is still some time away, and demand for the two instruments differs. The $105,000 price is not a prediction of what BTC will be worth.

Now imagine the contract's final day. You can still buy BTC for $100,000, while the expiring future sells for $105,000. An obvious idea appears:

1. Buy BTC for $100,000.
2. Sell the future for $105,000.
3. Collect the difference when the contract settles, less costs.

As more people do this, buying pushes BTC up and selling pushes the future down. The gap narrows.

A cash-settled contract uses a specified BTC price benchmark for its final calculation. That does not mean it must match every price on every exchange exactly. The simpler point is: expiry gives the future a point at which it settles against a reference price. That is its anchor.

3. What if I don't want a December contract?

A crypto trader says:

I don't specifically want December BTC. I just want to hold a short position: make money if bitcoin falls.

But the December contract ends. You have to move into the next one. When that ends, you move again. This is called rolling a futures position.

4. Why should a perp follow BTC at all?

Suppose actual BTC costs $100,000, but BTC-PERP trades at $120,000.

An ordinary future has a final settlement ahead of it. A perp has no such date. What brings it back towards $100,000?

Putting “BTC” in the name is not enough. It needs another mechanism to help keep the two prices close.

That mechanism is funding: periodic payments between traders holding long and short positions.

5. Funding is “gravity” for the perp price

Imagine spot BTC is $100,000 and the perp is $102,000. Buyers are actively taking longs — positions that benefit from a rise — and pushing up the contract price.

With positive funding, longs pay shorts. Suppose the rate is +0.05% for an eight-hour interval. For a position worth $100,000, that means:

$100,000 × 0.05% = $50 for one funding payment.

Holding a long becomes more expensive. Someone else sees the other side: “I could hold a short and receive those payments.” More sellers enter, putting downward pressure on the perp price towards spot.

When the perp trades too cheaply, funding can turn negative. Then shorts pay longs, making it more attractive to buy and hold the perp.

The price does not return to spot on command. The sign of funding depends on the exchange's formula, not just two prices at a single instant. But the idea is to make one side more expensive and the other more attractive.

An ordinary future is anchored by final settlement. Funding helps perform that role for a perpetual.

Eight hours is an example, not a universal rule. Hyperliquid pays funding hourly. Where payments happen at specific times, holding a position at that moment matters: the charge is not necessarily divided by the minutes you held it.

Here are the BTC funding rates currently available across exchanges. Read each rate with its payment interval; an annualized figure extends today's rate mathematically, rather than promising future income. You can find the intervals in the BTC funding monitor.

For more detail, see funding rates explained. To try your own position size, use the funding calculator.

6. What do I buy when I press Long?

If the price rises, my position gains. If the price falls, it loses.

Suppose you open a long representing 1 BTC at $100,000 and close it at $101,000. The difference is $1,000 in your favour. Close at $99,000 instead, and you lose $1,000. The screen calls this PnL: profit or loss.

These examples use an ordinary linear contract settled in USDT or USDC, before trading fees and funding. Contracts settled in the coin itself can use a different formula.

7. Leverage is a separate setting

You can hold that same BTC-PERP at 1× leverage:

• $100,000 collateral → $100,000 position → 1× leverage;
• $10,000 collateral → $100,000 position → 10× leverage.

A 1% price rise produces $1,000 of profit in both cases: the position size is identical. But that is 1% of your collateral in the first case and 10% in the second. Losses work the same way.

So these are separate things: perp describes the contract; leverage describes position size relative to collateral. If you use leverage to increase the position itself, the dollar gains and losses grow too.

8. Why isn't this just buying BTC with borrowed money?

With a spot margin purchase, the process is fairly literal. You have $10,000, borrow another $10,000, and buy $20,000 of BTC. You now have BTC and a debt.

With a perp, you can post the same $10,000 and open a $20,000 position. Opening that contract does not, by itself, mean someone lent you another $10,000 and bought bitcoin with it.

You get the effect of price changes on a $20,000 position without buying the coin. That is why a perp is called a derivative: its result depends on another asset.

9. Where does the profit come from?

In this simplified picture, the exchange accounts for our gains and losses. It does not create money because BTC went up: one side's gain matches the other side's loss. Funding also moves money between the sides; trading fees go to the venue.

A real exchange has many participants opening and closing positions. Your long is not forever tied to one particular person, but the principle of matching sides remains.

10. What if everyone wants to go long?

Suppose far more people want to buy than sell. That does not mean there are already more open longs than shorts: every matched contract has both sides.

Buyers can, however, accept higher and higher prices. The perp rises relative to spot, and positive funding attracts new sellers.

Some of them make two trades together:

1. Buy 1 BTC on the spot market.
2. Short a perp representing 1 BTC.

If both prices rise by $10,000, the spot gains $10,000 and the short loses $10,000. If both fall by that amount, the reverse happens. Much of the directional exposure cancels out, while the short receives payments when funding is positive.

This is the basis of spot-perp arbitrage. It is not free money: the two prices can move differently, funding can change sign, and the short can be liquidated if its collateral runs low — even while separately held BTC is gaining value.

11. Why are there three BTC prices on the screen?

Imagine a huge buy order briefly pushes the perp from $100,000 to $110,000. BTC on other venues still trades around $100,000.

Closing every short because of one brief spike would be a bad idea. Exchanges therefore use several prices:

• Last price — $100,080. The price of the latest trade in the perp itself.
• Index / oracle price — $100,000. A BTC price reference, usually assembled from multiple sources.
• Mark price — $100,030. A calculated price used to assess position risk and often decide when liquidation is needed.

Those numbers are illustrative. The prices are usually close, but answer different questions. Mark price helps reduce the effect of an isolated order-book spike; it is not a promise that you can close your position at that price.

12. What BTC-PERP 10× means now

You can read that label like this:

I post collateral and open a position on BTC price changes, with no scheduled expiry. My position is ten times my collateral. I have not bought bitcoin itself. Funding and participants' trades help keep the contract price near BTC.

“Futures” survives from the original construction. First there was a transaction scheduled for the future. Some contracts replaced delivery with a cash calculation. A perp removed the expiry date as well.

That is why the screen looks like leveraged trading on price changes. Your intuition about what you are doing makes sense; the name carries the instrument's history.

One last point: “perpetual” does not mean you can wait indefinitely for the price to recover. If losses consume too much collateral, the exchange forcibly reduces or closes the position. That is liquidation, and it usually happens before collateral reaches zero. So 10× leverage does not guarantee that a position can survive exactly a 10% adverse move.

Venue documentation: Hyperliquid funding, Bybit PnL and leverage, Hyperliquid price references.