What are Perpetual Futures (Perps)?

Derivatives and Futures Explained

In finance, a derivative is a contract whose value is linked to another asset, such as Bitcoin. It lets traders speculate on price movements without owning the actual asset.

One of the most common derivatives is a Futures contract — an agreement between two parties to buy or sell an asset at a fixed price on a specific future date. Before entering the contract, both sides agree on two things: the price and the expiration date.

For example, let’s say Bitcoin is trading at $100,000. Alice believes the price will rise above $110,000, while Bob thinks it will fall. They make a deal: Alice agrees to buy 1 BTC from Bob at $100,000 in one month.

Scenario 1: Bitcoin jumps to $110,000. Because Alice buys it at the agreed $100,000 so she earns a $10,000 profit.
Scenario 2: Bitcoin drops to $95,000. Alice still has to pay $100,000, losing $5,000, while Bob gains that amount.

That’s the essence of Futures trading: your profit or loss depends on whether the market moves in your favor.

What Are Perpetual Futures?

Perpetual Futures, or Perps, are similar to futures but with one key difference — they have no expiration date. You can hold your trading position for as long as you want, as long as you maintain enough margin to support it.

Because perps never expire, the market uses something called a funding rate to keep the perp price close to the spot price.

When the perp price is higher than the spot price → longs pay shorts.
When it’s lower → shorts pay longs.

These small payments, known as funding fees, keep both prices balanced over time.

Let’s take an example of how Perps work in practice:

Alice opens a long position on Bitcoin perps when BTC is $100,000. Two months later, Bitcoin rises to $110,000. Alice closes her position and earns a $10,000 profit — even though she never actually owned any BTC.

That’s the appeal of perps: they allow traders to profit from price movements in either direction, without owning the underlying asset.

Leverage and Margin Explained

One feature that makes perpetuals popular in crypto is leverage.

Leverage allows traders to open positions larger than their actual balance. For example, with 2x leverage, Alice can open a $200,000 position using only $100,000 of her own funds.

If the price moves in her favor, her profit doubles — but if it moves against her, her losses also double.

That’s why understanding margin is crucial:

Initial Margin: the collateral you need to open a position.
Maintenance Margin: the minimum balance you must keep to avoid liquidation.

If your funds fall below the Maintenance Margin level, the position may automatically close to prevent further losses.

Isolated Margin and Cross Margin

When trading Perpetual Futures, you’ll often see two margin modes: Isolated and Cross. Both affect how your collateral is managed and how risks are handled.

Isolated Margin:

In this mode, each position has its own separate margin.
The amount you put into that trade is “isolated” — meaning if the position is liquidated, only that margin is lost, not your whole balance.
An Isolated Margin is often the safer choice for beginners or anyone who prefers strict control over their risk.

Example: You open a long position on BTC with $100 in isolated margin. Even if it gets liquidated, your other funds and trades stay safe.

Cross Margin:

All your open positions share the same margin balance.
Profits from one position can help cover losses from another.
If the overall margin balance drops too low, all positions could be liquidated.
Useful for experienced traders who manage multiple positions and want flexibility, but it carries higher risks.

Example: If you’re long on BTC and short on ETH under cross margin, gains from ETH can help protect your BTC trade — but if both go against you, you could lose everything in that shared balance.

In short, Isolated Margin gives you clear boundaries and lower risk per trade, while Cross Margin offers more flexibility but higher exposure.

Why Do Traders Trade Perps?

You might wonder: Why not just buy actual Bitcoin and sell it when the price goes up?

Perpetual Futures (Perps) have become one of the most popular trading instruments in crypto — and for good reason. They give traders more control, flexibility, and opportunities to manage risk or maximize returns without directly holding the asset itself.

Here’s why many traders prefer perps:

Trade in any market condition: With perps, you can go long when you believe prices will rise or go short if you expect a drop. This means you can profit from both bullish and bearish markets — not just when the price goes up.
Amplify potential returns with leverage: Perps allow you to open larger positions using smaller capital through leverage. For example, with 2x leverage, your $100 can control a $200 position. This can double your profit — but also your loss — so it’s crucial to manage risk carefully.
Hedge your portfolio: Perps aren’t just for speculation; they’re also great hedging tools. Imagine you’re holding ETH and expect a short-term dip. You can open a short position on ETH perps to offset potential losses from your spot holdings.
Deeper liquidity: Perps often have higher trading volumes than spot markets. This means better liquidity, making it easier to enter or exit large positions quickly — even when the market is volatile.

In short, perpetual futures give traders a smarter way to participate in the crypto market. They let traders gain exposure, hedge risk, or speculate — all without holding the real asset.

Start Trading Perps on Coin98

Coin98 Super Wallet makes it simple to trade perpetuals directly from your non-custodial wallet — giving you full control of your funds while exploring advanced trading tools.

Here’s how:

Fund your Perps wallet: Deposit SOL or USDC on Arbitrum to start trading. Your balance will appear in seconds to a few minutes, depending on the asset.
Pick your market: Explore the Markets section or quickly find an asset using the search bar.
Open position: Choose Long or Short, enter your amount, adjust leverage, and set Auto Close. Review your order details, confirm & open the position.

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You can now monitor all open positions in real time from the Futures tab.

If you have any questions about how Perps trading on the Coin98 App, check our guide here: How to trade perpetual futures on Coin98.

Risk reminder: Trading perpetuals involves risk. Always manage leverage carefully and only trade with funds you can afford to lose.

About Coin98 Super Wallet

Coin98 is an open, decentralized, and secure DeFi and AI wallet that provides the essential tools and infrastructure for everyone to enter and participate in any opportunities on the Open Internet so they can build and shape their own future.