A derivatives contract to buy or sell an asset at a predetermined price at a future date; in crypto, perpetual futures (no expiry) are most common.
Crypto futures allow traders to gain long or short exposure without owning the underlying asset. Standard futures have expiries; perpetuals track an index price and use funding payments to anchor the contract near spot.
A trader opens a 5× long BCH perpetual position; if price rises 10%, the position gains ~50%, but losses are also amplified and can trigger liquidation.
Key elements include margin, leverage, liquidation thresholds, and mark price. Exchanges use insurance funds and auto-deleveraging mechanisms to handle bankrupt positions.
Placing isolated margin caps risk to the position; cross margin shares collateral across positions, which can propagate liquidations.
All terms and definitions may update as the Cryptionary improves.