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How perpetual swaps became crypto’s dominant leveraged trading tool

Perpetual swaps, or perps, process an estimated $40 to 50 trillion a year in volume and eliminate contract expiry, using periodic funding payments to keep prices aligned with spot.

Reported · Written up by our desk · Market Structure

Perpetual swaps, commonly called perps or perpetual futures, have become one of the most traded instruments in crypto, with CoinDesk estimating activity of $40 to 50 trillion per year. The product is widely used by professional traders, hedge funds, and retail speculators to get leveraged exposure to the price of bitcoin without owning the underlying asset, and it dwarfs spot trading.

CoinDesk traces perps’ rise to shortcomings in early crypto futures. In traditional markets, leveraged exposure typically comes from futures that expire and require positions to be rolled forward, but in crypto, futures often traded at a premium to spot, creating confusion for retail traders, while expiries could force positions to close regardless of trader intent.

Perps, developed by Ben Delo and launched by BitMEX in May 2015, solve the expiry problem by removing settlement dates entirely. There is no expiry to roll, so traders can hold positions for hours or years, but that creates a structural need to keep the contract price from drifting away from the spot price.

BitMEX addressed that alignment challenge through a funding mechanism that exchanges payments between traders on opposite sides of the market every eight hours. According to CoinDesk, when the perpetual swap trades above spot, longs pay shorts, and when it trades below spot, the payment runs the other way, with the exchange taking no cut. The funding rate is calculated based on how far the perpetual price is away from spot, though the article’s excerpt does not include the full formula.

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