Perpetual futures contracts, affectionately known as “perps” in crypto circles, have become the instrument of choice for a growing cohort of US retail traders chasing outsized returns. The problem: the data on who actually wins this game is, to put it gently, discouraging.
What perps are and why they’re a problem
Think of a perpetual futures contract as a bet on the future price of a crypto asset, except there’s no expiration date. Traditional futures have a settlement date baked in. Perps just keep going, like a tab you never close at the bar.
The appeal is leverage. Platforms offer anywhere from 50x to over 100x leverage on these contracts, meaning a trader can control $100,000 worth of Bitcoin with just $1,000 of their own capital. In English: if the price moves 1% in your favor, you double your money. If it moves 1% against you, you’re wiped out.
Funding rates, which are periodic payments exchanged between long and short traders to keep the contract price tethered to the underlying asset, can swing wildly during volatile periods. When markets move fast, these rates can eat into positions even when a trader’s directional bet is technically correct.
