Normal Futures vs Perpetual Futures: What’s the Difference? (Complete Guide)
If you’re entering the world of crypto derivatives, one of the first questions you’ll encounter is: Should I trade Normal Futures or Perpetual Futures? While both products allow traders to speculate on the future price of cryptocurrencies using leverage, they operate very differently. Understanding these differences is crucial because they affect:- How long you can hold a trade
- Whether you pay funding fees
- How contracts are settled
- Trading strategies
- Risk management
- Overall profitability
What are Futures Contracts?
A Futures Contract is a financial agreement between two parties to buy or sell an asset at a predetermined price at a future date. Unlike spot trading, you don’t need to own the underlying cryptocurrency. Instead, you’re simply speculating on whether its price will rise or fall. For example:- Buy BTC Futures if you expect Bitcoin to rise.
- Sell BTC Futures if you expect Bitcoin to fall.
Types of Crypto Futures
There are two major types of crypto futures:- Normal Futures (Traditional Futures)
- Perpetual Futures (Perpetual Contracts or Perps)
What are Normal Futures?
Normal Futures, also called Traditional Futures or Expiry Futures, are contracts that have a fixed expiration date. When the contract reaches its expiry date, it is automatically settled. Examples:- BTC Monthly Futures
- BTC Quarterly Futures
- ETH Quarterly Futures
Example of a Normal Futures Contract
Suppose today is: 1st January BTC Price: $100,000 You buy a BTC Monthly Futures contract that expires on: 31st January Regardless of whether you close the trade manually, the contract will automatically settle on its expiry date. After settlement, you’ll need to open a new contract if you wish to maintain your market exposure.What are Perpetual Futures?
Perpetual Futures, often called Perpetual Contracts or simply Perps, are futures contracts without an expiry date. This means you can theoretically hold your position indefinitely, provided:- You maintain sufficient margin.
- Your position is not liquidated.
- You continue paying or receiving funding (if applicable).
Example of a Perpetual Futures Contract
BTC Price: $100,000 You buy a BTC Perpetual contract. Unlike a monthly futures contract, there is no expiration date. You may hold the position:- One hour
- One day
- One month
- Six months
The Biggest Difference: Expiry
This is the single most important distinction.Normal Futures
- Have a fixed expiry date.
- Automatically settle on expiration.
- Need to be rolled over into a new contract if you want to maintain exposure.
Perpetual Futures
- Never expire.
- Can remain open indefinitely.
- Stay active until you close the position or it is liquidated.
Price Difference
Because Normal Futures expire, their prices may differ from the current spot price due to factors such as:- Time remaining until expiry.
- Interest rates.
- Carrying costs.
- Market expectations.
Funding Rates
One of the biggest differences between the two contract types is funding.Normal Futures
- No periodic funding payments.
- Price converges with spot naturally as expiry approaches.
Perpetual Futures
- Use periodic funding payments between long and short traders.
- Funding helps maintain price alignment with the spot market.
- Traders may pay or receive funding depending on market conditions.
Settlement
Normal Futures
Contracts are automatically settled on the expiration date. Settlement may be:- Cash settled
- Physically settled (rare in crypto)
- Exchange-specific
Perpetual Futures
There is no scheduled settlement. The position remains open until:- You manually close it.
- You are liquidated.
- The exchange force-closes it under exceptional circumstances (for example, due to contract delisting or risk management events).
Leverage
Both contract types usually support leverage. Examples:- 2x
- 5x
- 10x
- 20x
- 50x
- 100x
- Exchange policies
- Asset traded
- Position size
- Regulatory requirements
Margin Requirements
Both Normal Futures and Perpetual Futures use:- Initial Margin
- Maintenance Margin
Liquidity
Perpetual Futures generally have:- Higher trading volume
- Better liquidity
- Smaller bid-ask spreads
- More active traders
Popular Trading Strategies
Normal Futures
Commonly used for:- Long-term hedging
- Institutional risk management
- Calendar spread trading
- Basis trading
- Commodity-style futures strategies
Perpetual Futures
Popular for:- Day trading
- Scalping
- Swing trading
- Leveraged speculation
- Algorithmic trading
- Copy trading
- High-frequency trading
Advantages of Normal Futures
No Funding Payments
You don’t pay or receive recurring funding.Predictable Expiry
The contract lifecycle is known in advance.Useful for Hedging
Businesses and institutional investors often hedge exposure using expiry-based contracts that match a specific future date.Less Impact from Funding Costs
Long-term traders don’t need to account for recurring funding payments.Disadvantages of Normal Futures
Contract Expiry
Positions cannot be held indefinitely.Rollovers Required
If you wish to maintain exposure beyond expiry, you’ll need to close the expiring contract and open a new one. This process is known as rolling the position.Lower Liquidity
Certain expiry contracts may have fewer active traders than perpetual contracts.Advantages of Perpetual Futures
No Expiry Date
Positions can remain open indefinitely, subject to margin requirements.High Liquidity
Perpetual contracts are generally the most actively traded crypto derivatives.Better for Active Trading
Ideal for:- Intraday traders
- Scalpers
- Swing traders
- Automated strategies
Easy to Understand
They behave similarly to spot trading, except leverage and funding are involved.Disadvantages of Perpetual Futures
Funding Payments
Holding positions for long periods may result in significant funding costs—or funding income—depending on market conditions.Crowded Positioning
Heavy long or short positioning can lead to elevated funding rates.Higher Liquidation Risk with Leverage
Because perpetual contracts are often traded with high leverage, poor risk management can result in rapid liquidation.Real-World Example
Suppose BTC Spot Price is: $100,000Trader A Buys Monthly Futures
Contract Expiry: 30 Days No funding payments. At expiry:- Profit or loss is realized.
- Contract settles automatically.
Trader B Buys Perpetual Futures
No expiry. Funding is exchanged at regular intervals. Trader B can keep the position open indefinitely, provided:- Margin requirements are met.
- Funding costs are manageable.
- The position is not liquidated.
Comparison Table
Which One Should You Choose?
Choose Normal Futures If:
- You want a contract with a defined expiration.
- You are hedging future exposure.
- You prefer not to deal with recurring funding payments.
- Your strategy aligns with a known future settlement date.
Choose Perpetual Futures If:
- You actively trade crypto markets.
- You want to hold positions without worrying about contract expiry.
- You require high liquidity.
- You use automated strategies or algorithmic trading.
- You’re comfortable monitoring funding rates.
Frequently Asked Questions (FAQs)
Which is more popular in crypto?
Perpetual Futures are by far the most widely traded crypto derivatives because they combine high liquidity, leverage, and the convenience of having no expiry date.Do Normal Futures have funding rates?
No. Funding rates are a feature of perpetual futures contracts.Can I hold a Perpetual Futures contract forever?
In theory, yes. As long as:- You maintain sufficient margin.
- Your position isn’t liquidated.
- You continue meeting the exchange’s requirements, including funding payments when applicable.
Why do institutions still use Normal Futures?
Traditional futures provide fixed settlement dates that are useful for hedging future obligations, managing portfolio exposure, and implementing structured trading strategies.Which is better for beginners?
Many beginners find Perpetual Futures easier to understand because there is no contract expiry. However, beginners should first understand:- Leverage
- Margin
- Liquidation
- Funding rates
- Risk management
Final Thoughts
Both Normal Futures and Perpetual Futures are powerful derivatives that allow traders to speculate on cryptocurrency prices without owning the underlying asset. The biggest distinction is simple:- Normal Futures have a fixed expiration date and settle automatically when the contract expires.
- Perpetual Futures never expire and rely on funding rates to keep their prices aligned with the spot market.