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# Normal futures vs perpetual futures in crypto trading

# 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

In this guide, we'll explain **Normal Futures vs Perpetual Futures** in detail, compare their features, advantages, disadvantages, and help you decide which contract is better for your trading style.

***

# 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.

Crypto futures also allow traders to use leverage, meaning they can control larger positions using relatively small amounts of capital.

***

# Types of Crypto Futures

There are two major types of crypto futures:

1. **Normal Futures (Traditional Futures)**
2. **Perpetual Futures (Perpetual Contracts or Perps)**

Although both track the price of an underlying asset like Bitcoin or Ethereum, they differ in one very important aspect:

**Expiry.**

***

# 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

You cannot hold these contracts forever.

Once they expire, the exchange settles the contract according to its settlement rules.

***

# 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).

Perpetual Futures are the most popular crypto derivatives because they closely resemble spot trading while still offering leverage.

***

# 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

As long as your account meets the exchange's margin requirements and the position remains open.

***

# 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.

As expiry approaches, the futures price naturally converges with the spot price.

Perpetual Futures, however, remain close to the spot market through the use of **funding rates**, which incentivize traders to keep perpetual prices aligned with spot.

***

# 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

The maximum leverage available depends on:

* Exchange policies
* Asset traded
* Position size
* Regulatory requirements

***

# Margin Requirements

Both Normal Futures and Perpetual Futures use:

* Initial Margin
* Maintenance Margin

If your account equity falls below the required maintenance margin, your position may be liquidated.

***

# Liquidity

Perpetual Futures generally have:

* Higher trading volume
* Better liquidity
* Smaller bid-ask spreads
* More active traders

This is one reason why perpetual contracts dominate crypto derivatives trading.

Traditional futures contracts may have lower liquidity, particularly for contracts with longer-dated expiries.

***

# 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:

**\$100,000**

***

## Trader A Buys Monthly Futures

Contract Expiry:

30 Days

No funding payments.

At expiry:

* Profit or loss is realized.
* Contract settles automatically.

If Trader A still wants BTC exposure, a new futures contract must be opened.

***

## 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

| Feature              | Normal Futures               | Perpetual Futures                    |
| :------------------- | :--------------------------- | :----------------------------------- |
| Expiry Date          | Yes                          | No                                   |
| Funding Rate         | No                           | Yes                                  |
| Automatic Settlement | Yes                          | No Scheduled Settlement              |
| Can Hold Forever     | No                           | Yes (subject to margin requirements) |
| Contract Rollovers   | Required                     | Not Required                         |
| Price Convergence    | At Expiry                    | Through Funding Mechanism            |
| Liquidity            | Moderate                     | Generally Higher                     |
| Best For             | Hedging & Long-Term Planning | Active Trading & Leverage            |

***

# 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

before trading any leveraged product.

***

# 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.

For active crypto traders, perpetual contracts have become the preferred choice due to their flexibility and deep liquidity. For institutions, hedgers, and traders with date-specific objectives, traditional futures remain an important tool.

Before choosing either product, make sure you understand how leverage, margin, liquidation, and funding costs can affect your overall trading performance.

***