What it means
Perps are the most traded crypto product. They allow high leverage, which is why fast moves can trigger chains of forced liquidations.
In practice
Perps let crypto traders go long or short with leverage without worrying about expiry or rolling contracts. Price tracks the coin closely, so most short-term crypto analysis is done on the perpetual chart.
The funding rate doubles as a sentiment gauge. Persistently high positive funding means longs are crowded and paying to stay in; deeply negative funding means the same for shorts. Open interest shows how much leverage has built up.
What to watch for
Funding is charged for as long as you hold, and the liquidation price sits closer than most people expect at high leverage. At 20 times leverage, a move of about 5% against you is enough to lose the whole margin.
Related terms
4 terms- Funding rateRegular payments between longs and shorts on crypto perpetual futures that keep their price near spot.
- LiquidationYour broker or exchange force-closing a leveraged position because your margin ran out.
- CryptocurrencyDigital assets like Bitcoin and Ether that trade on crypto exchanges 24 hours a day, 7 days a week.
- LeverageControlling a position larger than your cash; it magnifies gains and losses equally.