Perpetual futures have swiftly evolved from a niche product popular among digital asset enthusiasts into one of the most heavily traded instruments in digital markets. With Coinbase announcing the launch of its Commodity Futures Trading Commission (CFTC)-regulated perpetual futures contracts, the stage is set for their entry into the mainstream.
Devexperts, which offers software for capital markets firms, recently explored the world of perpetual futures.Â
Perpetual futures, often referred to as “perps”, differ from traditional futures in that they have no expiry date. Traders are not required to roll contracts forward or take delivery of the underlying asset. To ensure that perp prices remain close to the spot market value, a funding rate mechanism is applied, with payments exchanged between long and short traders at fixed intervals. This creates incentives for traders to correct any price imbalances between futures and spot markets, Devexperts explained.
The funding rate mechanism works by transferring payments between traders depending on whether the futures market is trading above or below the spot price. When perps are priced higher than spot, long traders pay shorts. Conversely, when perps trade below spot, shorts pay longs. These payments, which occur multiple times a day depending on the exchange, keep the market aligned with spot values.
Although perps share similarities with contracts for difference (CFDs), there are key distinctions. CFDs are over-the-counter products, usually offered by brokers who act as counterparties to their clients’ trades. Perps, in contrast, are exchange-traded, with a single market where all participants trade against one another.
Their popularity is attributed to their accessibility, affordability, and the leverage they offer. Much like CFDs, perps allow traders to speculate without owning assets directly, making them attractive to retail investors. In the US, CFDs never achieved widespread adoption due to regulatory restrictions, but perps have filled this gap. Many market watchers expect trading volumes to soar as regulated offerings become available.
Coinbase’s forthcoming product, set to begin trading on 21 July 2025, marks a significant milestone, Devexperts said. The exchange has adapted the structure of perps to meet US regulatory requirements, introducing contracts that technically expire every five years while still functioning as perpetual instruments. Its funding rates will be settled twice daily, rather than every eight hours.
The success of zero-day-to-expiry options among retail investors suggests that demand for perps will be strong. As Devexperts, a company developing software for capital markets, notes, traders have shown a clear preference for derivatives that offer leverage, flexibility, and continuous trading without the burden of rolling contracts or managing delivery of the underlying asset. Perps appear to fit that bill perfectly.
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