What are perpetual futures?
If you are new to this trading option, the first question that will probably be going through your mind is, “What are perpetual futures?” Well, let’s break it down.
Perpetual futures are also referred to as perps. They are a great way to trade on the prices of digital assets or cryptocurrency without having to purchase them. What makes them stand out from traditional contracts is that they don’t have a fixed expiry date and are constantly adjusted by a unique mechanism called the funding rate.
The funding rate is a small, regular payment that traders on either the long or short side of the contract pay to the other side. This simple setup ensures that the prices of perpetual futures do not deviate too far from the asset’s spot price. There are aspects of the funding rates, which are as follows:
- Positive funding rate:
If the perpetual futures are priced above the spot price, it indicates that more traders are demanding long positions. Traders who hold long positions will be required to pay a fee to those holding short positions.
- Negative funding rate:
In this case, the perpetual futures are priced lower than the spot price. Traders who hold short positions will instead pay a fee to those with long positions.
Market conditions influence the funding rate discussed above, which in turn influences the perpetual rate, keeping them as close as possible to the spot price.
Pros and cons of trading perpetual futures
Pros and Cons
- Long-term contract with no expiry date
- Covers major cryptocurrencies including Bitcoin, and Ethereum
- Use leverage to tap into market with small amount of capital
- Volatility of cryptocurrencies can affect trades
- Higher risk of significant losses
Main features of a perpetual futures contract
If you are unsure of what a perpetual futures contract entails, the following are some of the key characteristics:
No expiry date
Perhaps the most important feature of perpetual futures is that they do not expire. Unlike regular event contracts that settle when the real-life event unfolds, perps are different. There’s no deadline, allowing you to hold your position for as long as you want, so long as you have sufficient margin. This is a great option if you like long-term markets that let you hold positions without worrying about expiry dates.
Capacity to leverage
The opportunity to leverage a position is another key feature of perpetual futures. This feature lets you control larger positions even with a small amount of capital. For instance, with 5x leverage, you can hold a $5,000 position with $1,000 in capital. Note that while this offers greater potential profit, there’s also a risk of larger losses. You’ll need to learn proper risk management to get the best value when you leverage positions.
Margin requirements
As we mentioned earlier, there is no expiry date with perpetual futures contracts. However, you must have a minimum margin balance to keep your positions open. If you fail to meet the margin requirement at any point, your positions may be automatically closed down to avoid more losses.
How do perpetual futures prediction markets work?
Perpetual futures prediction may seem complex, but in reality, it is straightforward. Here’s how it works
The first thing you need to do is decide whether digital asset prices will rise or fall. In this case, you have two options as follows:
If you believe the prices will increase, open a long position.If you speculate that the prices will decline, you open a short position.
📈 Determine your leverage
The next step is to increase your market exposure through leverage. For instance, a 10x leverage means every 1% market move will produce around a 10% gain or loss on your position. High leverage can increase your potential returns, but it can also increase your risk.
🔍 Keep tabs on your position
As we discussed above, perpetual futures do not expire. However, periodic payments are made between long and short traders as the market moves.
You can exit the trade at any point in time. But your final profit or loss will depend on various factors, including your entry price, exit price, leverage used, trading fees, and funding payments.
Are perpetual futures and prediction markets the same?
No, they are not. But in terms of
perpetual futures vs prediction markets – what’s the difference, exactly? Perpetual markets focus on long-term events and have no expiration date. In essence, traders can speculate continuously on crypto price movements until they are ready to close their positions.
In most cases, perpetual futures focuses on digital assets and cryptocurrencies. This means you can expect to trade on markets around cryptocurrencies such as Bitcoin, Ethereum, HYPE, Litecoin, among others.
In contrast, prediction market sites allow traders to speculate on the outcomes of short-term events by purchasing “Yes” or “No” shares. These events typically span multiple markets, including cryptocurrencies, finance, geopolitics, culture, entertainment, and politics.
Contracts don’t last forever and usually settle on a specific date. However, as with perpetual futures, you can sell shares at any time to lock in some profit, rather than waiting for the market to settle.
Here’s a breakdown of the common differences between the two below:
| Feature | Perpetual futures | Traditional prediction markets |
| Contract expiry | N/A | Fixed settlement date |
| Market type | Continuous | Event based |
| Leverage | Available | N/A |
| Funding rates | Yes | N/A |
| Share prices | N/A | $0.01 to $0.99 |
| Typical markets | Cryptocurrencies | Elections, sports, cryptocurrencies, finance, politics, culture, and more |
| Ongoing cost | Funding rate | None |
| Ideal for | Active traders with knowledge of cryptocurrencies | Active traders who want to speculate on real-world events |
Signing up for an account on the best perpetual futures prediction market sites
To start trading on perps, you’ll need to register for an account on the prediction market platform. Here’s our step-by-step guide to make this happen.
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Click any of the links to view our list of the
best prediction markets apps
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Pick an option and click the link attached to visit your preferred platform
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Click the “Sign up” button and input the information required
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The operator will send a link to your email address, which you must open to verify it
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Complete the KYC verification by uploading your government-issued ID, SSN number, and other documents
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Deposit some funds into your account using one of the payment methods available
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Head to the Perps market section and pick a position
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Monitor your position and close it when ready
Best perpetual futures prediction market sites: Our top pick
Perpetual futures contracts have been around for a while. However, they’ve only recently begun appearing on prediction trading platforms, with Kalshi taking the lead. For this reason, it is currently the only platform we recommend for trading on the perps market.
This is especially important if you want a platform regulated by the CFTC and able to operate without issues in the United States. Keep reading to see why this is the top choice.
Kalshi: The best perpetual futures prediction market site
Kalshi: Pros and Cons
- Find markets via search facility
- Extensive range of prediction markets
- Clear fees system
- Large help center
- Limited promos for existing customers
Kalshi started out as a platform that let traders speculate on the outcomes of questions across various markets, including finance, cryptocurrencies, sports, and culture. In fact, it was one of the first prediction markets to obtain a CFTC regulation in the US, which made it even more popular among traders who are particularly concerned about safety.
While it still dominates that section of the market, it has also expanded into the perpetual futures market and is currently the only regulated prediction site covering this market in the US. At the time of writing this guide, we spotted perps on digital assets such as Bitcoin, HYPE, and Ethereum. Leverage for events is also excellent, with some reaching up to 6x, which means a greater profit potential when your position moves in the right direction.
Register for an account on the Kalshi prediction market, and you can still claim a $10 welcome bonus when you make trades of up to $10. Like what we saw in a
Sleeper Markets review, most welcome offers of prediction market sites usually reward new traders for a minimum trade amount.
Why should you trade on perpetual futures?
If you are still unsure whether perpetual futures contracts are right for you, here are a few more reasons to consider them.
No expiry
Again, this is the major benefit you get from perps. Contracts don’t expire, allowing you to keep your positions open for as long as you want without worrying about rolling over or creating new ones.
24-hour availability
Perps are available 24/7. If you register on the best perpetual futures prediction market sites, you’ll find events open 24 hours daily. This is especially important when dealing with digital assets like cryptocurrencies that never close. With the right platform, you can react to sudden price movements, breaking news, and economic events, and decide on your position based on the new information you receive.
Profit from both ends of the market
If you believe prices will increase, go with the long position. If you believe the contrary will occur, opt for short positions. This type of flexibility ensures you can benefit from the market, regardless of which direction it chooses to go.
Access to major cryptocurrencies
Top perpetual futures sites let you open positions on various cryptocurrencies including Ethereum, Bitcoin, litecoin, Solana among others. There’s also a chance for newer assets to be added to the list as perpetual futures gain more popularity among users.
Potential risks in perpetual futures trading
There are many benefits of trading on
Kalshi perpetual futures. But like every other form of trading, it also comes with a few risks including:
Risk of liquidation
There is no way to determine how the prices of digital assets will move. This means there is a high chance that it can go against your position. If this happens, and you fall below the required maintenance margin, there may be an automatic liquidation. While this is meant to help you prevent further losses, it could also lead to you losing all the margin you have accumulated for a certain position.
Funding rate costs
Funding rate is used by perpetual futures markets to ensure prices don’t fall too far from the starting point. However, when holding a long position, these recurrent funding costs may add up, and make the entire trade less profitable than anticipated.
Volatility
Cryptocurrencies are extremely volatile, and this can cause sudden price movements. While holding the right position can result in high profit margins, it can also lead to sudden losses if you are on the other end of it.
Strategies for trading perpetual futures
Getting the best experience when trading perpetual futures demands more than guesswork. If you want to get the best from your trades in these contracts, you’ll need to combine a solid strategy with proper risk management. This will reduce unnecessary losses, while improving your overall experience. Here are some of the tested strategies our experts recommend:
- Do your research:
Hold positions on your preferred digital assets only after doing your research. For instance, if you want to hold a position on Bitcoin, do your research by studying past price movements and recent trends. Then, make a decision based on the insights you get. This way, you are making more knowledgeable trades instead of going in blindly.
- Use lower leverage:
The maximum leverage may be more exciting when calculating potential returns. However, if there is a sudden downturn against your position, it could lead to liquidation. Therefore, we recommend going for lower positions so you have ample space to deal with unexpected price movements without triggering the automatic liquidation.
- Monitor your position:
Don’t just hold a position and vanish. It is important to monitor it especially when it comes to funding rates. These can add up especially in a long-term market, so make sure it is still favorable, and close your position if it is not.
- Start small:
Don’t just invest all you have in a single position. Instead, use a small percentage of your balance on positions. This way, even if the market goes against your position, you don’t lose everything you have.
Conclusion: Should you trade on perpetual futures?
Well, this depends on your requirements and crypto market experience. If you want to predict the price movement of cryptocurrencies, and potentially gain profit for holding the correct positions with no expiry dates, then this market is for you. You can also tap into the leverage feature, which further boosts your profit even with a smaller capital. What’s more, markets are open 24/7 allowing you to change your positions based on recent news and sudden price movements.
Of course, perpetual futures also come with downsides, some of which include higher risks, and recurrent funding costs that might cut down your profit. Still, all of these can be managed by doing your research, starting with the minimum leverage, and monitoring your position.
If you are ready to explore this market, Kalshi is the best perpetual futures prediction market site we recommend. It is easy to use, regulated in the US, and also features traditional prediction event contracts that span 10+ markets from sports to politics. To register, click any of the links on this page, and follow the prompts.
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Best perpetual futures prediction market sites FAQs
🤑 What are perpetual futures prediction markets?
These are platforms that allow you to predict the price movements of cryptocurrencies by holding long or short positions. They have no expiry dates, making them ideal for traders who prefer long-term markets.
📜 Is it legal to trade on perpetual futures in the US?
Yes, it is. However this only applies if you trade on a platform like Kalshi that is regulated by the Commodity Futures Trading Commission (CFTC). Note that you must also be at least 18 years old, and complete the verification process to trade without issues.
🔍 Are perpetual futures and traditional prediction market contracts the same?
No, they are not. Perpetual futures allow you trade long-term crypto price movements and don’t have an expiry date. In contrast, standard prediction markets let you trade on outcomes of real-world events, centered around politics, finance, sports, cryptocurrencies among others. Contracts settle after the event settles, meaning you don’t hold them for too long.
