Spot versus perpetual futures: which one you actually want
One has no liquidation price and no carry. The other has both, plus the ability to short. Most beginners pick the wrong one.
These are not two ways of doing the same thing. They are different instruments with different failure modes, and choosing between them correctly matters more than almost any entry you will make.
The difference in one table
| Spot | Perpetual futures | |
|---|---|---|
| You own | The asset | A contract |
| Liquidation price | None | Yes |
| Carry cost | None | Funding every 8 hours |
| Can short | No | Yes |
| Can hold forever | Yes | Only while margin lasts |
| Worst case | Asset falls, you still hold it | Position closed, margin gone |
Read the last row twice. In spot, a 60% drawdown is painful and recoverable because you still own the coins. In a leveraged perpetual, a 5% move against you at 20x ends the position permanently and you own nothing.
How a contract with no expiry stays near spot price
A traditional future converges to spot because it expires. A perpetual never does, so the tether is economic instead: the funding rate. When the perp trades above spot, longs pay shorts every eight hours, which makes being long progressively expensive and pulls the price back.
That mechanism is elegant and it is not free. Funding is charged on position value, not on your margin. A $10,000 position opened with $500 at 20x, held through sustained 0.3% funding, pays its entire margin away in under three weeks without price moving at all.
Liquidation distance, which is what leverage really buys
| Leverage | Move to liquidation | In crypto that is |
|---|---|---|
| 5x | about 19.5% | A bad month |
| 10x | about 9.5% | A bad week |
| 20x | about 4.5% | A bad day |
| 50x | about 1.5% | A bad hour |
A trader who correctly predicts a 40% rally can still lose everything at 50x if price dips 2% on the way. Being right about direction and surviving to collect are separate problems.
When a perpetual is the right instrument
- Shorting. Spot cannot do it at all.
- Hedging a spot holding without selling it and triggering a taxable disposal.
- Short directional trades where the carry is paid for days rather than months.
Outside those three, the position usually belongs in spot. If your thesis is measured in months, you are paying funding and holding a liquidation price for no reason.
Mark price, and why your chart lies to you
Most venues liquidate against a mark price derived from an index across several exchanges, not the last trade on their own book. This is deliberate and protective: it stops one thin wick on one venue from liquidating everybody. It also means the price that triggers your liquidation may never appear on the chart you are watching.
What to do with this
- Learn mechanics in spot. The absence of a liquidation price is the best protection a beginner has.
- Before any leveraged position, check the distance on the liquidation price calculator and the carry on the funding rate calculator.
- Keep the stop no further than halfway to liquidation. If that stop is inside normal noise, the leverage is wrong for the instrument.
- Rehearse it with nothing at stake in the Practice Arena.
Ready to pick where to trade?
Once the basics click, match to a broker that fits your country and capital.