Crypto Perpetual Futures: Funding, Settlement, Leverage, and Institutional Use
Summary
The document explains how perpetual futures differ from dated futures: they have no expiry, while periodic funding payments help keep contract prices near spot prices. It distinguishes cash settlement, which can provide price exposure without taking custody of the underlying asset, from physical delivery. The discussion frames regulated, cash-settled contracts as one route for institutional participation in crypto derivatives.
It also describes leverage as a source of both capital efficiency and amplified losses, making risk controls important, and contrasts centralized venues with decentralized exchanges that may face liquidity and compliance challenges. The article cites estimates for perpetuals’ share of Bitcoin trading and daily volumes, but provides no source or methodology for those figures. It offers a conceptual overview rather than a trading model; funding rates, margin rules, venue risks, and contract terms can vary, so the descriptions should not be treated as universal specifications.
Key ideas
- Perpetual futures have no expiry and use funding payments to encourage alignment with spot prices.
- Cash-settled contracts offer price exposure without requiring custody of the cryptocurrency.
- Leverage increases both capital efficiency and the scale of potential losses.
- Exchange regulation, liquidity, settlement terms, and funding mechanics matter when comparing venues.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.