Unit 3 · Level 4 · Perpetuals & Funding
Perpetuals: futures forever
A perpetual future ('perp') lets you go long or short with leverage, without owning the asset. Unlike a normal future, it NEVER expires. Perps are crypto's most-traded product by far, moving more volume than spot. Powerful, elegant… and the instrument behind most liquidation stories you've heard.
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What you get asked
What does holding a BTC perp long actually give you?
No coins change hands. You hold a position whose P&L tracks the price, settled in margin. Custody lessons don't apply here; margin and liquidation lessons VERY much do.
Normal futures converge to spot at expiry. Perps never expire, so what keeps their price glued to the real market?
Funding is the invisible rubber band: when perps trade above spot, longs pay shorts (discouraging longs); below spot, shorts pay longs. Genius mechanism. Next lesson dissects it.
Match the perp term to its meaning
Mark price matters: liquidations use a smoothed fair price, not the last trade, as protection against single-print manipulation.
Perps let you ___ an asset just as easily as going long: one click, same interface.
That symmetry is perps' honest gift: expressing a bearish thesis in spot-only crypto used to be hard. All your short-selling risk rules apply, with leverage on top.
Formi's framing test: a perp is best thought of as…
Funding costs, leverage risk, liquidation mechanics. Never a shortcut to riches. Everything from Leagues 1-4 was preparation for instruments like this. The tool is neutral; the sizing decides the story. 🐜
The rest of this unit
Futures without expiry, the funding rubber band, cascades and hedging. Crypto's sharpest machinery.