perps 101 perps account for over 90% of crypto volume today; they drive the market. It's critical to understand them, yet most people working in crypto don't actually grasp how they function. I held a few internal sessions this week breaking them down. Here's the TL;DR - not a guide, just my stream of consciousness notes. Start with order books - they're universal, not specific to perps. Bids = buy orders, asks = sell orders. The difference between the best ask and the best bid is the "spread." There is no true singular "price" of an asset. It's just the midpoint of the spread. On CoinGecko or CMC, they take the average across many exchanges. Makers add to the book, while takers grab what's there and move the price. Exchanges want larger books, and fees incentivize this: maker fees are lower, taker fees are higher. Post-only orders are a way to ensure you're making, not taking. Market orders walk the book. Your average fill is always worse than the top of the book. Snap buy then snap sell = guaranteed loss equal to the spread plus fees. Stops and takes: take profit is just a limit order resting on the book. Stops are usually triggers held off-book by the exchange. Mature exchanges execute stop losses cleanly. Newer ones don't, so set alerts for your stop losses. Forwards = agreement to buy or sell an asset for a price on a future date. Requires actual delivery of the asset. Futures = forwards with 1) standardized contracts for better liquidity 2) margin is required 3) marked to market daily. Futures enable leverage. Futures converge to spot at expiration. If the price of the future > price of the underlying, arbitrageurs come in. They can do this because the price converges at expiration. Liquidations happen when margin is close to zero. Your position is closed by opening an opposite direction market order. For example: ETH long gets liquidated = the exchange opens a market short on your behalf. This pushes the price down further. It might trigger more liquidations, which open more market shorts, pushing the price further down. That's a liquidation cascade. In the other direction, it's called a short squeeze. People like leverage from futures. But they want positions open for a long period of time, with no expiration. Enter perps: futures with no expiration. But expiration is the anchor that keeps future prices tied to spot - without it, perp prices will diverge from the underlying with no tether. What to do? Funding rates. If perp > spot, longs pay shorts. If perp < spot, shorts pay longs. Arbitrageurs close the gap. Funding payments happen every 8 hours or 1 hour depending on the exchange. Perps are always on. You can hold exposure indefinitely. Just watch that your funding payments aren't eating into your returns. Funding is often positive (longs pay shorts) because crypto people are eager for leveraged longs. This creates a "cash and carry" arbitrage: long spot, short the same asset perp. Rake in funding payments. This is what Ethena does. Typically, collateral is USDC. With the cash and carry arbitrage, there's a possibility of liquidation if prices move against you. Some venues allow you to use crypto as margin. Better cash and carry: long ETH spot, use ETH spot as collateral to short a perp. If ETH price increases, you need more margin for your short, but your collateral has increased in price. Chillin'. With on-chain perps, everyone's liquidation points are known. This creates a PVP book. Treat it as adversarial by default. Perps collapse everything a trader wants into one instrument: leverage, simplicity, 24/7 availability, no borrowing friction, marked-to-market. BitMEX introduced the first perp in 2016. Trade BTC on leverage. Shoutout to Arthur Hayes. today, they're the center of the market.