Perpetual futures vs prediction markets explained
In 2025, the average trading volume of perpetual futures was seven times that of traditional spot trading, and we figured out one of the main reasons. You see, prediction markets tend to be cyclical, as trading volumes mainly hit historic highs during significant events. We’ve seen it play out during Super Bowl season, US presidential elections, or Federal Open Market Committee meetings.
Once these events pass, however, the volume often drops, which indicates that prediction market traders don’t necessarily find it sticky. But that’s not the only issue. Prediction markets also freeze your funds if you decide to hold until the outcomes are resolved. In perpetual futures, the prices are updated every second. And this attracts attention for longer periods and creates more ongoing interactions among traders.
When comparing perpetual futures vs prediction markets, the core question to ask is actually very simple. Are you trading the price movement of an asset or the outcome of a real-world event? That question is what separates these two major product types when it comes to expressing your market views. Before we continue to explain them in more detail, here’s a quick comparison table:
| Feature | Perpetual futures | Prediction markets |
| Primary purpose of trading | To speculate on the future price of an asset | To predict the outcome of future events |
| Underlying market | Cryptocurrencies, indices, commodities, and forex | Politics, sports, economics, culture, finance, weather, entertainment, and crypto |
| Expiration date | None | Ends when an event is resolved |
| Leverage | Available | Not available |
| Settlement time | Continuous until position closes | Automatic one-time settlement after an event outcome is verified |
| Potential for profit | Based on price movement | Based on the correctness of predictions |
| Liquidation risk | High | Low to nonexistent |
What is futures trading?
For those wondering
what perpetual futures are, the definition is pretty straightforward. They are derivative contracts that let you speculate on the future price of an asset without actually buying or owning them. In the crypto ecosystem, perps became popular because they do not have expiration dates. You can hold long or short positions indefinitely as long as leverage is maintained.
A long position profits when an asset price rises, while a short position profits when the price drops. Apart from the fact that you can express market views in both directions, the main advantage of perpetual futures is capital efficiency. Because of the presence of leverage, you can control a larger position with less upfront investment. Although it gives you the opportunity to make more gains, it also increases the risk profile in futures trading.
What are prediction markets?
Prediction markets are event-based contracts tied to real-world outcomes. What happens, basically, is that you’re given a question regarding an event, and you get to choose whether the outcome will be a “yes” or “no”. With cryptocurrencies, for instance, instead of directly trading the price of an asset like Bitcoin or Ethereum, you’ll be participating in a defined event outcome.
For beginners, prediction markets can feel more intuitive than perpetual futures because the central question is event-based. So instead of calculating leverage and margin, you’ll start with a predefined outcome. However, it’s important to note that participation and pricing in prediction markets often shift as new information emerges. This implies that there’s still a certain level of risk involved, even if not as much as is possible with perps.
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Certain limitations apply. The offer is available to new users only, subject to the terms and conditions at http://kalshi.com/tc/55. 18+ only. Restrictions and eligibility requirements apply. Event contract trading involves significant risk and is not appropriate for everyone. Please carefully consider if it is appropriate for you in light of your personal financial circumstances. Kalshi products are not available in all jurisdictions. See kalshi.com/regulatory for more information.
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18+ Only. Restrictions and eligibility requirements apply. Not available in all jurisdictions. Trading involves high risk and may result in loss of your entire investment. See polymarket.us/tos for more information. The Polymarket US App serves as an independent software provider and affiliate of Polymarket US and Polymarket Clearing, the CFTC-regulated derivatives exchange and clearing organization.
The biggest differences between perpetual futures and prediction markets
Both prediction markets and perpetual futures let you profit from being right about future outcomes. Each also requires you to form a view, size a position, and then manage your risk. However, the similarities end there, and although the
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will offer both products, you need to apply different approaches.
The most obvious difference between perpetual futures and prediction markets is the object of speculation. In perps, the contracts are tied to the price of a specific asset. You either go long because you think the price will rise or you go short because you believe the price will fall. Your profit or loss will scale continuously to match how far the prices move in your direction or against you.
With prediction markets, the contracts are tied to the outcome of an event. You could purchase a “yes” share on “Will BTC close above $100,000 by December 31?” because you believe the probability of this happening is high. Your profit or loss, in this case, is binary. This means that the outcome will either occur (for a $1 payout) or it won’t (for a $0 payout).
The underlying mechanism is that prediction markets give you binary event exposure, while perpetual futures give you continuous price exposure. In more mathematical terms, a perp position on BTC will profit from every dollar it moves in your favor. However, a prediction market position on BTC hitting $100,000 only cares about one thing. And that’s whether the price will be below or above $100,000 on the resolution date. It doesn’t matter whether it gets to $150,000 or just stops at $100,001, as the payout will be the same.
How event contracts and derivatives differ 🔍
A derivative is a financial contract with a value that’s based on an underlying asset, reference point, rate, or index. Crypto futures, for example, are derivatives because their value is tied to asset prices. For an event contract, its value or reward logic is based on specific event outcomes, meaning the contract only resolves according to defined criteria.
As a derivatives (perps) trader, you must factor in price movements, leverage, collateral, and liquidation. Even if your market analysis is correct over time, any temporary price shifts can still lead to losses if you over-leveraged the position. As an event contract trader, on the other hand, you must factor in the event definition, settlement timing, resolution rules, and the uncertainty of outcomes. Essentially, the biggest question is whether the event conditions are met or not.
These differences directly affect how you prepare to trade. For perpetual futures on cryptocurrencies, preparation involves developing a trading plan for entry, exit, leverage, stop-loss, and the size of positions. With contracts on the
best economy prediction markets, preparation involves reading the rules, estimating probabilities, evaluating the specific event, and understanding settlement.
When does each product make sense? 🤔
Perpetual futures trading makes the most sense when you want to actively trade the price direction of an asset. It’s also a powerful choice when you need to use leverage, hedge exposure, or simply take short positions. However, due to the high risk of liquidation it involves, it’s important to apply stronger risk controls while trading.
For prediction markets, they make the most sense when you want to predict a defined outcome rather than the price of an asset. This can include crypto milestones, sports-related outcomes, economic developments, or other clearly defined events that are legally permitted. The most critical point to note is that perpetual futures and prediction markets aren’t competitors. Instead, they are different instruments for expressing your market views on various events.
How does risk compare in perpetual futures vs prediction markets
Every trading product carries a level of risk, but the exact type differs. For perps and prediction markets, the potential risk is where the two products diverge the most. Let’s have a look below:
- Perpetual futures (open-ended risk)
– With perps, losses can quickly consume your initial margin if there’s no proper risk management. Even though a “stop loss” tool can help manage this, slippage in fast markets can push your actual exit point beyond the intended level. For example, let’s say you leveraged long on ETH and the price then moves far enough against you, this can theoretically lead to a total loss of your margin. Basically, with a 10x leverage, a 10% adverse price move can liquidate your position.
- Prediction markets (fully defined risk)
– In prediction markets, the maximum amount of money you can lose is the price you paid for your shares. If you buy “yes” shares at $0.40 each, for example, all you’ll be risking is exactly $0.40 per share. There are no leverages, no liquidation, and no margin calls. The mathematics of what you stand to profit or lose at the
best recession prediction market sites
are straightforward and clearly defined before you enter a position.
Profit comparison in perps and prediction markets
The profit potential in perps compared to prediction markets is also very different, and we’ll explain below:
- Profits in perpetual futures scale with magnitude
– What this means essentially is that the further an asset price moves in your favor, the more profit you’re likely to make. So, let’s assume you went long on BTC at $85,000 with a 5x leverage. If the price of Bitcoin then hits $95,000, your return on margin will be roughly 59%. There are no caps on how much you can make (upside), but liquidation caps your downside if you haven’t managed it properly.
- Profits in prediction markets are fixed at resolution
– The potential profit in prediction markets is entirely determined by the entry price in relation to the fixed $1 payout. For example, if you purchased a “yes” contract at $0.20 and the event occurs, you’ll receive $1, which is a 400% return. However, purchasing the same “yes” contract at $0.80 will return just 25%.
The profit profiles in prediction markets and perpetual futures create a certain type of edge-seeking. In perps, you’re simply looking for direction and magnitude. With contract trading at the
best fed rate prediction market sites, for instance, what you’re after are mispriced probabilities.
Perpetual futures vs prediction markets: Pros and cons
Pros and Cons
- Suitable for different trading styles
- Offers multiple ways to express market views
- Broad range of events and assets to trade on
- High liquidation risks in perpetual futures
Our final thoughts on prediction markets vs perpetual futures
In our comparison of perpetual futures vs prediction markets, we discovered that there isn’t a universally better option, as each serves a different purpose. With perps, you can profit from an asset’s price while managing leverage and liquidation risk. In prediction markets, you get a chance to trade on the probability of an event happening with a predetermined max potential loss. Ultimately, the ideal choice will depend on your objectives and risk tolerance. So if you’re ready to give these products a go, click any of the on-page banners to get started.
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FAQs: Perpetual futures vs prediction markets – What’s the difference?
🧤 What’s the difference between prediction markets and perpetual futures?
The main difference between both products is that prediction markets focus on event outcomes, while perpetual futures focus on an asset’s price movement.
🛑 Which is riskier between perpetual futures and prediction markets?
Perpetual futures generally come with more risk because leverage can amplify both your profits and losses.
🌗 Can I trade perpetual futures and prediction markets together?
Yes, traders often use perpetual futures to speculate on price movements while still using prediction markets to predict real-world events.
