What are perps, anyway? Everything you need to know about crypto’s hottest trading instrument

Perpetual swaps, also called perpetual futures or “perps” for short, are the dominant trading instrument in the crypto market, processing an estimated $40 to 50 trillion a year in volume. They dwarf spot trading, and they are the product that professional traders, hedge funds and retail speculators reach for when they want leveraged exposure to the price of bitcoin or tther without owning the underlying asset. Despite their ubiquity, the mechanics that make them work are not widely understood.

To understand perps, it helps to understand what came before them. In traditional finance, leveraged exposure to an asset typically comes through a futures contract, an agreement to buy or sell something at a set price on a specific date. When that date arrives, the contract expires and settles. Traders who want to maintain their position must roll it into the next contract.