Cryptathon. Get the app
BTC rises 5%. What does your 100 USDT become?SpotBTCYou own 0.001 BTCWorth 105 USDTPerpetual long, 1xContract100 USDT positionYou own no coinPnL +5 USDTSame move, same +5 USDT.Only spot gives you the coin.
BTC rises 5%.What does your 100 USDT become?SpotBTCYou own 0.001 BTCWorth 105 USDTPerpetual long, 1xContract100 USDT positionYou own no coinPnL +5 USDTSame move, same +5 USDT.Only spot gives you the coin.

Same 100 USDT, same 5% rise. Only one gives you a coin.

What a perpetual future is

A perpetual future follows the price of a coin and never expires. You hold a contract, not the coin, and your profit or loss is in USDT.

Lesson 1 of 85 min3 parts

Updated . Cryptathon rules checked on .

A perpetual future is a contract that follows a coin's price and never expires. You hold a contract, not the coin, and profit or loss is paid in USDT on the whole position. At 5x, 100 USDT of margin opens a 500 USDT long, so a 2% fall loses 10 USDT. Funding every 8 hours keeps the price near spot.

By the end, you can

  1. 1Say how a perpetual future differs from buying the coin
  2. 2Work out the profit or loss of a position from its margin and leverage
  3. 3Say how funding keeps the perpetual price near the spot price

1 of 3

How is a perpetual future different from spot?

A perpetual future is a contract that follows the price of a coin, such as BTC, and has no expiry date. You never own the coin: you hold a position, and your profit or loss is paid in USDT.

On Cryptathon you can trade perpetual futures on BTC, ETH and SOL. When you buy BTC on the spot market, you get the coin. When you open a perpetual long, you get a contract whose value moves with the BTC price.

Worked example

Spot or perpetual, at 1x

BTC is at 100,000 USDT. You put 100 USDT into BTC two ways: once on the spot market, and once as a perpetual long at 1x. BTC rises 5%. What do you have?

  1. 1
    Find the coins you get on spotOn spot your USDT becomes the coin.
    100 ÷ 100,000 = 0.001 BTC
  2. 2
    Find the new priceThat is a 5% rise.
    100,000 × 1.05 = 105,000 USDT
  3. 3
    Value the coinsYour 0.001 BTC is now worth more.
    0.001 × 105,000 = 105 USDT
  4. 4
    Find the perpetual's profitThe contract follows the same move and pays it in USDT.
    100 × 5% = 5 USDT

AnswerBoth gain 5 USDT. On spot you hold 0.001 BTC, worth 105 USDT. With the perpetual you hold no coin: you have your 100 USDT plus 5 USDT of PnL.

BTC price, USDTYour PnL at 1x, USDT105,000+5104,000+4103,000+3102,000+2101,000+1100,0000Entry+5% = +5 USDT
BTC price, USDTYour PnL at 1x, USDT105,000+5 104,000+4 103,000+3 102,000+2 101,000+1 100,0000 Entry+5% = +5 USDT
Figure 1 BTC rises from 100,000 to 105,000 USDT. A 100 USDT perpetual long at 1x follows the price: each 1,000 USDT on BTC is 1 USDT of PnL.
Your turn You open a perpetual long on ETH at 1x with 200 USDT. ETH rises 10%. What do you have?
  1. Some ETH, worth 220 USDT

    That is what spot gives you. A perpetual gives you no coin, only profit or loss in USDT.

  2. Your 200 USDT plus 20 USDT of PnL

    Right. 200 × 10% = 20 USDT, and the position holds no coin.

  3. 200 USDT until the contract expires

    A perpetual has no expiry. Your PnL moves with the price while the position is open.

  4. 2 USDT of PnL

    That is 1% of 200. The move is 10%, so 200 × 10% = 20 USDT.

Show the answer

B: Your 200 USDT plus 20 USDT of PnL. 200 × 10% = 20 USDT, and the position holds no coin.

2 of 3

How do margin and leverage work on a perpetual?

You open a perpetual position with margin, the USDT you put in. Leverage sets how big the position is compared with that margin: at 5x, 100 USDT of margin opens a 500 USDT position. The Leverage lesson shows this step by step.

Profit and loss is in USDT, and it counts on the whole position, not only on your margin. A loss comes out of your margin. With no expiry date, the position stays open until you close it or it is liquidated.

You can also open a short, which gains when the price falls. The Long and short lesson shows both sides.

Worked example

An ETH long at 5x

You put 100 USDT of margin on an ETH long at 5x. ETH falls 2%. What is your PnL?

  1. 1
    Find the position sizeMargin times leverage.
    100 × 5 = 500 USDT
  2. 2
    Apply the move to the positionThe fall counts on all 500 USDT.
    500 × 2% = 10 USDT
  3. 3
    Take it from your marginThe loss is paid in USDT.
    100 − 10 = 90 USDT

AnswerA loss of 10 USDT. Your margin plus PnL is now 90 USDT. At no point do you hold any ETH.

100 USDT of margin at 5x. ETH falls 2%.Your margin100 USDTPosition, 5x500 USDTAfter −2%−10 USDT, 90 left500 × 2% = 10 USDT
100 USDT of margin at 5x.ETH falls 2%.Your margin100 USDTPosition, 5x500 USDTAfter −2%−10 USDT, 90 left500 × 2% = 10 USDT
Figure 2 100 USDT of margin at 5x opens a 500 USDT position. A 2% fall on 500 USDT is 10 USDT, so 90 USDT is left.
Your turn You put 50 USDT of margin on a BTC short at 4x. BTC falls 5%. What is your PnL?
  1. A loss of 10 USDT

    A short gains when the price falls. BTC fell, so this short gains.

  2. A gain of 10 USDT

    Right. 50 × 4 = 200 USDT, and 200 × 5% = 10 USDT.

  3. A gain of 2.50 USDT

    That is 5% of your margin. The move counts on the 200 USDT position.

  4. A gain paid in BTC

    A perpetual pays profit and loss in USDT, not in the coin.

Show the answer

B: A gain of 10 USDT. 50 × 4 = 200 USDT, and 200 × 5% = 10 USDT.

3 of 3

How does a perpetual stay near the spot price?

A dated future has an expiry date. Its price moves towards the spot price as expiry comes closer (How futures prices meet spot near expiry). A perpetual never ends, so it needs a different pull. That pull is funding: at set times, traders on one side pay traders on the other side.

The idea is simple. When the perpetual has traded above the spot price on average over the funding period, the rate is positive and longs pay shorts. Holding a long then costs money and holding a short earns it, so the price is pulled back down. When it has traded below on average, the rate is negative and shorts pay longs.

On Cryptathon, funding uses the average premium of the mark price over the index price during the 8 hours. A positive rate means longs pay shorts. A negative rate means shorts pay longs. Funding is paid every 8 hours, at 05:30, 13:30 and 21:30 IST. The payment is a share of your position value, not of your margin.

Worked example

One funding payment

You hold a BTC long with a position value of 1,000 USDT. At the funding time the rate is +0.01%. What do you pay?

  1. 1
    Work out one paymentFunding counts on the position value.
    1,000 × 0.01% = 0.10 USDT
  2. 2
    Count the funding times in a dayFunding is paid every 8 hours.
    24 ÷ 8 = 3
  3. 3
    Work out a day at this rateIf the rate stays the same all day.
    0.10 × 3 = 0.30 USDT

AnswerYou pay 0.10 USDT to the shorts, because longs pay when the rate is positive. At the same rate all day, that is 0.30 USDT.

Perpetual priceSpot pricePositive funding rate: longs pay shortsNegative funding rate: shorts pay longs
Perpetual priceSpot pricePositive funding rate:longs pay shortsNegative funding rate:shorts pay longs
Figure 3 Positive funding: longs pay shorts, which pulls the perpetual price down. Negative funding: shorts pay longs, which pulls it up. The rate uses the average premium over the 8 hours, not one moment.
Your turn The funding rate is negative. You hold a short. What happens?
  1. You receive funding

    Shorts receive when the rate is positive. A negative rate means shorts pay.

  2. You pay funding to the longs

    Right. With a negative rate, shorts pay longs, and that pulls the price back up.

  3. Nothing until you close

    Funding is paid at each funding time while the position is open.

  4. The contract expires and settles

    A perpetual has no expiry. Funding does the job that an expiry date does.

Show the answer

B: You pay funding to the longs. With a negative rate, shorts pay longs, and that pulls the price back up.

Common questions

Can you hold a perpetual future forever?

Yes. A perpetual future has no expiry date, so it stays open until you close it or it is liquidated. While it is open, you pay or receive funding at each funding time, every 8 hours. At +0.01% each time, a 1,000 USDT long pays 0.10 USDT per funding time, or 0.30 USDT a day.

What can you trade as perpetual futures on Cryptathon?

On Cryptathon you can trade perpetual futures on BTC, ETH and SOL, all priced in USDT. You can go long or short. The smallest position value is 10 USDT, and order sizes must also fit the market's lot size. Margin is isolated, so each position has its own margin. Trading fees come from your free balance, on top of the margin.

Is the perpetual price the same as the spot price?

Not exactly. The perpetual trades on its own order book, so its price can be a little above or below the spot price. Funding pulls it back: when the perpetual trades above spot on average, longs pay shorts, and when it trades below, shorts pay longs. The mark price is held within 1% of the index, which is built from spot prices.

Check yourself

Three questions on the whole lesson.

Question 1 of 3 Which is true for a BTC perpetual long?
  1. You own BTC until you close

    You hold a contract that follows the price, not the coin.

  2. Your profit or loss is paid in USDT

    Right. The contract follows the BTC price, and the result is in USDT.

  3. It must be closed before its expiry date

    A perpetual has no expiry date.

  4. It only gains after you close it

    PnL moves with every price change while the position is open.

Show the answer

B: Your profit or loss is paid in USDT. The contract follows the BTC price, and the result is in USDT.

Question 2 of 3 You put 40 USDT of margin on a SOL long at 10x. SOL rises 3%. What is your PnL?
  1. A gain of 1.20 USDT

    That is 3% of your margin. The position is 40 × 10 = 400 USDT.

  2. A gain of 12 USDT

    Right. 40 × 10 = 400 USDT, and 400 × 3% = 12 USDT.

  3. A gain of 3 USDT

    That is 3% of 100. Start from the position size, 400 USDT.

  4. A gain of 120 USDT

    That is 40 × 3. The move is 3%, which is 0.03, on 400 USDT.

Show the answer

B: A gain of 12 USDT. 40 × 10 = 400 USDT, and 400 × 3% = 12 USDT.

Question 3 of 3 You hold a position with a value of 2,000 USDT. The funding rate is 0.02% and your side pays. How much do you pay?
  1. 0.04 USDT

    That is 0.02% of 200. Funding counts on the whole 2,000 USDT position value.

  2. 0.40 USDT

    Right. 2,000 × 0.02% = 0.40 USDT.

  3. 4 USDT

    That uses 0.2%. 0.02% is 0.0002, so 2,000 × 0.0002 = 0.40.

  4. 40 USDT

    That uses 2%. 0.02% is a hundred times smaller.

Show the answer

B: 0.40 USDT. 2,000 × 0.02% = 0.40 USDT.

What to remember

  1. How is a perpetual future different from spot?A perpetual follows the coin's price, but you hold a contract and the result is in USDT.
  2. How do margin and leverage work on a perpetual?Margin times leverage is the position size, and the profit or loss on it is paid in USDT.
  3. How does a perpetual stay near the spot price?Funding is how a perpetual stays near the spot price without an expiry date.
Next lessonLong and short