When you buy crypto on a spot market, you take direct ownership of the asset. You can withdraw it to a self-custody wallet, stake it to earn rewards, use it to mint NFTs, send it to another person, or hold it indefinitely as part of your portfolio. If the price rises, your holdings are worth more; if it falls, you still own the exact same amount of the asset, and its value can recover if the price rebounds.
Perpetual futures (often called perps) are a type of derivative contract that tracks the spot price of an underlying crypto asset, with no fixed expiration date. You do not own the underlying asset when you hold a perp position. Instead, you deposit margin — a small amount of capital used to back the position — and gain exposure to price movements: if the price goes up, a long position gains value; if it goes down, a short position gains value.
A simple analogy: spot is buying a physical silver bar you can store and use, while a perp is a contract whose value rises and falls with the price of silver, with no physical bar changing hands.
Perps were created to solve specific limitations of spot trading, and they come with three key benefits that spot markets do not offer:
Easy shorting On spot markets, the only way to profit from a price drop is to borrow the asset, sell it, then buy it back later to repay the loan — a process that requires managing borrow terms, paying interest, and handling repayment workflows. For new traders, this adds significant friction and complexity. Perps let you take a short position (which gains value when the underlying asset’s price falls) just as easily as you take a long position. On Trending, opening a short is the same single action as opening a long, with the same risk controls, so there’s no extra workflow to learn. Shorting can also be used to hedge existing spot holdings: if you own crypto and want to offset potential losses during a market dip, you can open a short perp position without selling your spot assets.
Leverage Leverage lets you control a larger position size than the amount of margin you deposit. This means you can take meaningful price exposure with a smaller amount of capital set aside for trading — a position can be opened with $20 of margin, so your first perp trade does not have to be a large commitment — but it also amplifies both gains and losses relative to your initial margin. Small price moves that would be negligible for a spot holder can have a large impact on a leveraged perp position.
Unified margin across all markets Spot trading requires you to hold the specific asset you’re trading, or the quote currency (like a stablecoin) for each trading pair. To switch between trading BTC, ETH, and SOL, you would need to convert assets back and forth between each pair, incurring fees and slippage with every conversion. Perp accounts use a single margin asset (typically a stablecoin) for all supported markets. You can open positions on any perp market without converting funds first, making it faster to move between trading opportunities as market conditions change.
Perps are not an upgraded version of spot trading — they are a specialized tool with unique tradeoffs that can lead to faster losses if you don’t understand them. These are the most important risks to weigh before you start:
Funding payments Because perps have no expiration date, they use a mechanism called funding to keep their price closely aligned with the spot price of the underlying asset. Funding is a periodic transfer between long and short traders, not a fee charged by the trading platform. If the perp price trades above the spot price, traders holding long positions pay a small portion of their position value to traders holding short positions. If the perp price trades below spot, shorts pay longs. The exact rate and frequency vary by venue (check your platform’s current docs for details), but funding costs can add up over time for long-term positions. For example, if you hold a long perp during a period of sustained bullish sentiment, funding rates may be consistently positive, meaning you’ll pay regular costs that do not apply to spot holdings.
Liquidation risk This is the most critical difference from spot trading, and the one that most often catches new perp traders off guard. When you buy spot crypto, you can hold through any price drop, no matter how large, and still keep your full position. You only lose value if you sell at a lower price. With perps, your position is backed only by the margin you deposit. If the price moves far enough against you that your remaining margin can no longer cover the position’s unrealized losses, the platform will automatically close (liquidate) your position to prevent further losses. When liquidation happens, you lose the margin you put up for the position. Some platforms, including Trending, show your liquidation price before you confirm a position, so you know exactly how far price has to move against you before liquidation occurs. Liquidation risk applies to positions of any size, and it increases with higher leverage, so it’s critical to review this number for every trade.
The discipline leverage demands Leverage magnifies the impact of every short-term price move, which can make market swings feel far more intense than they do with spot trading. This intensity can lead to impulsive decisions — like chasing losses, over-sizing positions, or deviating from a pre-planned strategy — that erode capital much faster than you would experience with spot. Successful perp trading requires consistent position sizing, pre-defined exit rules, and the ability to stick to a strategy even when prices move quickly. If you’re still building that discipline, perps can be a much harsher learning environment than spot. Perp positions also require more active monitoring: a sudden, sharp price move that barely registers for a long-term spot holder can liquidate a leveraged perp position in minutes if you don’t have protective risk controls in place.
Perps serve a narrow set of use cases well, but for many common goals, spot is the simpler, more reliable choice. Spot is the better tool if:
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Trending does not provide investment advice. Trading perpetual contracts involves market and leverage risk. You are responsible for wallet safety and local regulatory compliance.