Perpetual futures and the crypto crash: leverage without an expiry date
The essentials in 30 seconds
- Perpetual futures are crypto contracts with no expiry date, and they can deepen a crash because leverage builds quietly and unwinds at once.
- A funding rate links the contract price to the spot price, and the side that pays signals crowding.
- Open interest counts open contracts, and a sharp rise before a fall shows leverage has grown.
- A 10x long position is liquidated after about a 10% fall, before fees.
- EQOS Asia serves decision makers in Singapore, ASEAN, and Hong Kong.
Perpetual futures are crypto contracts with no expiry date, and they sit at the centre of most talk about leverage and crashes. This page, part of the guide on crypto liquidations, explains how the contract works, what funding rates and open interest tell you, and why leverage built on perpetuals can unwind in a rush. The scene is set as of October 2026, in plain language and with small worked examples.
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What is a perpetual future in crypto, in plain terms?
A perpetual future is a contract that tracks the price of a crypto asset and never expires. A trader who expects a rise buys the contract, a trader who expects a fall sells it, and either can borrow against a small margin to make the position larger. The profit or loss follows the price of the asset, without any need to hold the coin itself.
A classic dated future ends on a set day, when it settles at the spot price. A perpetual replaces that settlement date with a regular payment between the two sides. The design keeps trading simple and the contract open for as long as the trader keeps enough margin, which is why the format spread so widely across crypto venues.
How does the funding rate keep a perpetual close to spot?
Without an expiry, something must pull the contract price toward the spot price. The funding rate does this job. At set intervals, one side pays the other. When the contract trades above spot, buyers pay sellers, which makes buying less attractive and nudges the contract back down. When it trades below spot, sellers pay buyers.
Take a hypothetical case: a funding payment of 0.1% on a $10,000 position costs $10 at each interval. The sum looks small, and it adds up when the rate stays high for days. A persistent high rate tells you that many traders want long exposure and pay for it, which is a sign of crowding.
What does open interest say about perpetual futures leverage?
Open interest counts the contracts that are still open, usually in dollar terms. A rising figure means new money is entering positions. A falling figure means positions are closing. Read it next to price: a rising price with rising open interest suggests that new leveraged longs are driving the move, and the market becomes more sensitive to a reversal.
A sharp rise in open interest before a fall is a common warning in crash write-ups, since it shows that leverage grew first. The figure does not reveal the direction of each position, so analysts pair it with funding rates and with liquidation maps. No single signal settles the question, and the three together give a fuller view.
Why does leverage with no expiry date raise crash risk?
A dated contract forces a decision on settlement day, which clears positions on a regular schedule. A perpetual has no such clearing date. Traders roll the same position forward for weeks, and the leverage stays in the market, hidden in plain sight. The build-up can continue until a move forces it out.
When the unwinding starts, it can happen quickly. Forced closings sell into the book, the price falls, and more positions reach their limit. The mechanics resemble those described in the guide on liquidations, with the difference that perpetual leverage is large and always on. The market’s resilience depends on how much of it sits on one side.
What is a long squeeze in perpetual futures during a crypto crash?
A long squeeze occurs when many traders hold leveraged long positions and the price turns down. As the price falls, long positions close by selling, which pushes the price lower and forces more longs out. As an illustration, a 10x long position is liquidated after about a 10% fall, before fees, so a market full of 10x longs has little room.
A short squeeze runs the other way, with forced buying lifting the price. Both are part of normal leveraged trading. A crash is different in scale: the squeeze spreads across assets, because traders sell other holdings to meet margin calls. That link from one contract to the whole market is why perpetuals appear in crash analysis so often.
Why do perpetual futures use a mark price in crypto?
A venue uses a mark price, often based on an index of several spot venues, to decide when a position is liquidated. The goal is to stop a single odd trade on one order book from wiping out positions. Smooth inputs reduce false triggers, and they also mean that your liquidation level can differ from the last traded price.
Read the venue’s description of how the mark price is built, because the detail varies. A trader who watches only the last traded price can be surprised when a closing arrives while the screen price looks safe. The liquidation price on your position is the number to trust, and the mark price is the one that drives it.
What can a reader check about perpetual futures before a crash?
Build a short dashboard with 3 lines: the funding rate, the open interest trend, and the nearest liquidation bands. Note the date and look for agreement. High funding, rising open interest, and thick bands on the same side describe a crowded market. Low funding and falling open interest describe a market with less leverage to unwind.
Teams that hold crypto can fold these checks into a treasury review, and the Λ simulator at EQOS Asia lets you test a stress case. This page is general information, not investment advice, and reflects the situation as of October 2026. For the wider picture, return to the pillar page on the crypto crash.
See also in this guide
Frequently asked questions
What are perpetual futures in crypto?
Perpetual futures are crypto contracts that track an asset price and have no expiry date. Traders use margin to hold larger positions, and a funding rate paid between buyers and sellers keeps the contract price near the spot price. The format keeps leverage open for as long as margin holds.
How do perpetual futures contribute to a crypto crash?
They store leverage in the market for long periods. When the price turns, forced closings sell into thin books and push the price down, which triggers more closings. The amount of leverage built beforehand, and its concentration on one side, decide how deep the fall goes.
What does a high funding rate mean?
A high positive funding rate means that buyers pay sellers to hold long positions, so many traders want long exposure. It suggests crowding on the long side. The signal has error, and analysts read it next to open interest and the nearest liquidation bands.
Is a perpetual future the same as a dated future?
A dated future settles on a set day at the spot price. A perpetual has no settlement day and relies on funding payments to stay close to spot. The two differ in how leverage is cleared, since a dated contract forces a decision at expiry and a perpetual does not.
Test your knowledge
1. What feature defines a perpetual future?
- A fixed settlement date
- No expiry date
- A ban on leverage
Show the answer
No expiry date.
2. What does the funding rate do?
- It keeps the contract close to the spot price
- It sets the block reward
- It fixes the exchange fee
Show the answer
It keeps the contract close to the spot price.
3. What does a sharp rise in open interest before a fall suggest?
- Leverage has shrunk
- Leverage has grown
- Trading has stopped
Show the answer
Leverage has grown.
4. After about what fall is a 10x long position liquidated, before fees?
- 50%
- 25%
- 10%
Show the answer
10%.
5. Which number drives liquidation on a perpetual?
- The last traded price
- The mark price
- The token supply
Show the answer
The mark price.
About the author
Stéphane Jambu
President, EQOS Forecast Asia
Stéphane Jambu leads EQOS Forecast Asia and works as a consultant in e-commerce, search visibility, and AI. LinkedIn profile
Sources: EQOS Asia simulator (eqos-asia.com/simulator.html), consulted on 23 October 2026. Page updated on 23 October 2026.