Perpetual Futures Explained: Funding, Mark Price and Liquidation

Perpetual futures ("perps") are futures contracts with no expiry date. You can go long or short an asset with leverage and hold the position for as long as you keep enough margin. A funding payment between longs and shorts, usually every hour or every few hours, keeps the contract price close to the spot price instead of a settlement date doing that job.

This guide covers the instrument itself: funding, mark price, margin and liquidation, a worked example, and where perps stand in the US as of 12 October 2026. For venues, see the best perp DEXs of 2026.

What are perpetual futures?

A normal futures contract is an agreement to buy or sell an asset at a set price on a set date. As that date gets closer, the futures price converges on the spot price, because at expiry the two must match. Traders who want to keep their exposure have to "roll" into the next contract, which costs fees and slippage.

A perpetual future removes the expiry. The CFTC's May 2026 order approving Kalshi's BTCPERP contract describes the structure clearly: the contract "will not expire on a fixed date", positions are "marked to market on a continuous basis", and price convergence comes from "a periodic funding mechanism whereby long and short position holders exchange funding payments that are based on the difference between the contract's mark price and the underlying reference price."

So there is one contract per asset instead of liquidity split across expiries, no rolling, and leverage on a small margin deposit. Perps are cash-settled: you never receive the coin, only the change in value, plus or minus funding and fees.

How the funding rate works

Funding is the piece that makes a perp work. If the perp trades above the spot price, the funding rate is positive and longs pay shorts. If it trades below, the rate is negative and shorts pay longs. Paying the crowded side's money to the other side pulls the price back towards spot. Our funding rate guide covers reading it as a market signal.

Most venues use a formula with two parts. Hyperliquid's documentation sets it out openly and says it is designed to match the process used by centralised exchanges:

Funding rate = average premium index + clamp(interest rate − premium index, −0.05%, +0.05%)

• Premium index: how far the perp's price is above or below the spot reference price, sampled frequently and averaged.
• Interest rate component: fixed at 0.01% per 8 hours on Hyperliquid, "for consistency with CEXs". That is about 11.6% a year paid by longs to shorts when the perp trades at spot.
• The clamp: small premiums are pulled back to the 0.01% baseline; large premiums dominate.

Two details matter in practice. First, funding is charged on the full position value (the notional), not on your margin. At 10x leverage, a 0.01% funding payment costs 0.1% of your margin. Second, the interval varies by venue. Hyperliquid computes an 8-hour rate but pays one eighth of it every hour and caps funding at 4% per hour. Coinbase's US product accrues funding hourly and settles it twice a day. On Hyperliquid, funding is "purely peer-to-peer", with no fee taken on the payments.

Index price, mark price and last price

A perp screen usually shows three prices:

• Index (or oracle) price: a reference spot price built from several spot exchanges. On Hyperliquid it is a weighted median of centralised-exchange spot prices, updated about every three seconds, and it drives funding.
• Mark price: the venue's estimate of the contract's fair value. According to Hyperliquid's price index docs, its mark price is a median of the oracle price adjusted by recent book activity, the book's own bid, ask and last trade, and perp prices on other large exchanges. It is used for margining, liquidations, take-profit and stop-loss triggers, and unrealised profit and loss.
• Last price: the most recent trade on that venue.

The mark price resists manipulation: one large order that spikes the last price should barely move it, so it does not trigger a wave of liquidations. In fast markets the two can still differ a lot. See also what is a price oracle.

Margin, leverage and liquidation

To open a perp position you post initial margin. Leverage is position size divided by margin: $10,000 of margin backing a $100,000 position is 10x. Our leverage guide goes deeper on sizing.

You must also keep a smaller amount, the maintenance margin. If losses push your account equity below it, the position is liquidated. On Hyperliquid, maintenance margin is half the initial margin at the asset's maximum leverage, which puts it between 1.25% and 16.7% of position value depending on the asset. Other venues use their own tiered tables.

Liquidation means the venue closes your position, partly or fully, before the loss exceeds your collateral. You can lose some or all of the remaining margin. Two margin modes decide what is at risk:

• Isolated margin: only the margin assigned to that position can be lost.
• Cross margin: your whole account balance backs all open positions, so a winner can support a loser, but one bad position can drain the account.

More in cross margin vs isolated margin.

A worked example with numbers

Illustrative figures only; fees are ignored and liquidation formulas vary by venue.

Setup. BTC trades at $100,000. You open a 1 BTC long on a perp ($100,000 notional) with $10,000 of isolated margin, so 10x leverage. Assume a maintenance margin of 0.5% of position value.

If BTC rises 5% to $105,000: your unrealised profit is $5,000, which is +50% on your $10,000 margin.

If BTC falls 5% to $95,000: your unrealised loss is $5,000, or −50% on margin. Your equity is now $5,000.

Liquidation. You are liquidated when equity falls to the maintenance requirement, about $450–$500 here. That happens after a loss of roughly $9,500, so at a BTC price of about $90,500. A move of under 10% against you wipes out the position. At 20x, the same maths puts liquidation under 5% away.

Funding. Suppose the funding rate sits at the 0.01% per 8 hours baseline and the perp trades above spot, so longs pay. You pay 0.01% × $100,000 = $10 every 8 hours, or $30 a day. Over 30 days that is about $900, or 9% of your margin, before any price move. If heavy demand pushes funding to 0.05% per 8 hours, the cost rises to $150 a day. Funding also reduces your equity, which nudges the liquidation price closer over time.

As a short, the signs reverse: you would receive that funding and lose if BTC rose.

Where perps came from, and their US status

The crypto perpetual swap was launched by BitMEX. Its XBTUSD contract went live on 13 May 2016 with up to 100x leverage and no expiry, as BeInCrypto recounts. In its 2025 launch post, Coinbase said perps represented "upwards of 90% of total crypto derivatives trading activity in some reports."

BitMEX itself has since closed. Its wind-down notice says the closure was announced on 23 July 2026 and that all exchange operations ceased on 23 September 2026. BeInCrypto reported that XBTUSD was settled and delisted on 16 September 2026.

In the US, Coinbase noted in 2025 that perps "have been largely unavailable". That has changed in steps:

• 21 July 2025: Coinbase Derivatives launched US "perpetual-style" futures under CFTC rules. They are long-dated futures with 5-year expiries, 24/7 trading and an hourly-accruing funding mechanism. As of 12 October 2026, Coinbase's US derivatives page lists nano Bitcoin and nano Ether perps at up to 10x leverage.
• 29 May 2026: the CFTC approved Kalshi's BTCPERP, a cash-settled bitcoin contract with no expiry, and treated it as a futures contract. On the same day, CFTC staff confirmed that certain crypto perpetuals listed on Deribit and offered through Coinbase Financial Markets may be categorised as foreign futures.

Rules differ by country, so check what applies where you live.

CEX perps vs DEX perps

The instrument is the same on both; what changes is who holds your collateral. Centralised exchanges custody your margin, run their own order books and liquidation engines, and usually require KYC, so the exchange's solvency is part of your risk. Perp DEXs hold margin in smart contracts or on an app-specific chain and settle on-chain, so your risk shifts to contract bugs, oracle failures and thin liquidity. Our Hyperliquid explainer covers one example; what is a perp DEX compares the models. Alongside funding, open interest is the number worth watching.

Risks, and what perps are used for

Perps are used for three main things:

• Directional trading with leverage, long or short.
• Hedging. Short a perp to offset exposure on coins you hold.
• Basis or "cash-and-carry" trades. Buy spot and short the perp in equal size. Price moves roughly cancel out and the trader collects funding while it is positive. This is the core of synthetic dollars such as Ethena's USDe, which the Ethena docs describe as "backed with crypto assets and corresponding short futures positions". See what is USDe.

The main risks:

• Liquidation. At high leverage, ordinary daily volatility is enough to close you out.
• Funding drag. A position on the popular side pays funding continuously.
• Mark-price and oracle risk. Liquidations follow the mark price, which can diverge from what you can actually trade at in fast markets, or be distorted if a price feed fails.
• Venue risk. On a CEX, the exchange can halt withdrawals or fail. On a DEX, contracts can have bugs.
• Overtrading. 24/7 markets and one-click leverage make it easy.

JewelSwap does not offer perpetual futures. Its apps on MultiversX, Sui and Radix cover liquid staking (JWLEGLD, JWLSUI, JWLXRD), yield farming and NFT-backed lending; see what is liquid staking.

Frequently asked questions

What is the difference between perpetual futures and regular futures?

Regular futures expire on a fixed date, and convergence at expiry keeps them in line with spot. Perpetual futures never expire. Periodic funding payments between longs and shorts keep their price close to spot instead.

Who pays the funding rate on a perpetual future?

When the funding rate is positive, longs pay shorts. When it is negative, shorts pay longs. The payment is charged on the full position value, not on your margin, and on many venues it goes directly between traders.

How often is funding paid?

It depends on the venue. Hyperliquid pays every hour. Coinbase's US perpetual-style futures accrue funding hourly and settle it twice a day. Other venues use different intervals, so check each contract's specifications.

Why is my liquidation price based on the mark price, not the last trade?

The mark price combines spot index prices with order book data. That makes it harder to manipulate than a single trade, which protects traders from being liquidated by one brief price spike.

Are perpetual futures legal in the US?

Yes, on CFTC-regulated venues. Coinbase Derivatives has offered 5-year "perpetual-style" futures since 21 July 2025. On 29 May 2026 the CFTC approved Kalshi's BTCPERP, a bitcoin contract with no expiry, as a futures contract. Offshore perp exchanges sit outside that framework.

Keep reading

• Funding rates in crypto explained
• Leverage in crypto: how it works and what it costs
• Cross margin vs isolated margin
• What is a perp DEX?
• What is Hyperliquid?

This article is educational and is not financial or legal advice. Leveraged derivatives can lose more than you expect, quickly. Funding and liquidation mechanics are from Hyperliquid's documentation, and US product details are from Coinbase and the CFTC, all as of 12 October 2026. The worked example is illustrative and excludes fees.