The good and the bad of perps, according to crypto traders

The article from CoinDesk discusses the popularity and challenges of perpetual futures contracts, or “perps,” in crypto trading. These contracts allow traders to control positions larger than their account balances and differ from standard futures by having no expiry date. Perps are especially important for trading altcoins, where dated futures (those with expiry) are illiquid and spot markets lack significant volume. Experienced traders highlighted perps for their deep liquidity, low fees, and high margin efficiency, meaning more exposure per unit of collateral.

Traders also explained why perps dominate daily volumes averaging over $200 billion, noting that dated futures’ expiries impose costs and illiquidity. Retail traders appreciate perps for better trade execution, lower fees, and the ability to run both long and short positions simultaneously via hedge mode, a feature often unavailable in regulated venues like CME. Traders benefit from margin efficiency since perps require only a fraction of a position's value as collateral, allowing capital to be spread across multiple venues effectively. Perps also enable continuous price discovery outside traditional market hours, as seen during geopolitical events like the 2026 Iran conflict, where crypto-based trading reacted ahead of official markets.

However, traders caution about funding rates, a recurring cost for holding perp positions, which fluctuate and are charged roughly every eight hours. Unlike dated futures where interest rates are known upfront, funding rates in perps can accumulate unpredictably and are exposed to market conditions, making them difficult to quantify or hedge. This exposure can sometimes turn apparently profitable trades into losses. Another concern is how some crypto exchanges socialized losses during market crashes by force-closing profitable short positions, a problem attributed to exchange margin models rather than perps themselves.

Interestingly, an institutional trader pointed out a structural asymmetry in perp risks: long positions tend to be safer because positive funding can be arbitraged away, while shorts face unbounded funding costs when negative rates persist, especially if the underlying tokens are scarce or hard to short. This dynamic was exemplified by Euler’s token earlier this year, where shorts paid steep funding costs due to concentrated supply and limited arbitrage. The article concludes that while perps have democratized futures trading by improving access and efficiency, the inability to price or hedge the embedded interest-rate risk represented by funding rates remains a key challenge until a liquid dated futures market develops in crypto.