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How spot and perpetual futures differ
In a spot market, you buy or sell the asset. If you buy Bitcoin with funds already in your account and do not borrow, you own the Bitcoin exposure without a futures expiry or margin-based liquidation. Selling Bitcoin you already hold reduces or closes that exposure; shorting Bitcoin generally requires borrowing or another instrument.
A perpetual futures position is a derivative, not a purchase of Bitcoin. It can provide long or short price exposure under the venue’s contract and settlement rules. A true perpetual has no ordinary expiry. Binance describes perpetual contracts as having no expiration or settlement in its perpetual-versus-traditional-futures explanation.
| Comparison | Unleveraged spot | Perpetual futures |
|---|---|---|
| What you hold | Bitcoin bought or sold in the spot market | A derivative contract whose terms and settlement currency depend on the venue |
| Going long | Buy Bitcoin; the position gains value if Bitcoin rises, before costs | Open a long contract under the venue’s rules |
| Going short | Usually requires borrowing Bitcoin or using another instrument | Open a short contract under the venue’s rules |
| Ongoing cost | Trading fees; no borrowing cost if the trade is fully paid | Trading fees and variable funding payments, which may be paid or received |
| Leverage and liquidation | No borrowing-related liquidation for a fully paid, unleveraged holding | Margin permits exposure beyond posted initial collateral; the position may be liquidated if margin requirements are not met |
| Expiry | The Bitcoin asset has no futures expiry | A true perpetual has no ordinary expiry; verify the exact product specification |
These are general distinctions, not guarantees that every venue implements the products identically. Spot margin is still a spot-market transaction, but it uses borrowed funds and can introduce borrowing charges and liquidation risk.
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What fees and funding can do to the total cost
Start with the cost of opening and closing the position. Trading fees can depend on the venue, account tier, order type, and whether an order adds or removes liquidity. A displayed maker or taker rate alone does not show the full cost of holding a position.
Spot costs
For a fully paid spot purchase, include the spot trading fee on the buy and any eventual sale. If you use spot margin, also account for borrowing or rollover charges. Kraken’s documentation, for example, describes its margin fees as additional to the usual trade fee on opening and closing spot-margin volume; those terms apply to Kraken, not to every venue.
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Perpetual funding
Perpetuals may have periodic funding payments between long and short positions. Funding can change over time, and your position may pay or receive it. On Binance, a positive funding rate means longs pay shorts; a negative rate means shorts pay longs. The mechanism is intended to help keep the perpetual price aligned with its reference price, but the formula and payment interval are venue-specific. Binance also notes that funding deductions can affect position margin and liquidation price.
Estimate the total cost over the time you expect to hold the trade: entry and exit fees, plus expected funding for a perpetual or borrowing and rollover charges for spot margin. Funding is variable, so a current rate is not a guaranteed rate for the full holding period. Without the venue’s current fee schedule, your account tier, and the eventual funding or borrowing charges, there is no reliable universal claim that one instrument costs less.
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How leverage changes risk
Leverage is the size of the exposure relative to the collateral committed to it. Coinbase’s US derivatives help page defines its calculation as contract notional value divided by the initial margin requirement; see Coinbase’s leverage and margin explanation. The exact margin calculation and available leverage depend on the contract and venue.
Leverage magnifies the effect of price movements on the collateral supporting a position. A smaller adverse move can consume a larger share of that collateral than it would in an unleveraged position. The maximum leverage a platform advertises is a product limit, not a measure of appropriate risk or a recommendation.
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Risk is not determined by a leverage setting alone. Position size relative to collateral, initial and maintenance margin, margin tiers, collateral treatment, and venue rules all matter. Kraken’s spot-margin guidance likewise cautions that risk depends on open position size relative to collateral, not only on the selected leverage level.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.Why a perpetual position can be liquidated
Maintenance margin is the minimum margin required to keep a position open under the venue’s rules. If the relevant account or position no longer meets those requirements, the venue may close some or all of it through liquidation. This is different from the market simply moving against you: liquidation is an action governed by the contract and platform’s margin rules.
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There is no single liquidation-price formula or threshold that applies to every Bitcoin perpetual. Depending on the product, the outcome can be affected by the position size, maintenance-margin tier, mark-price rules, collateral changes, funding deductions, and changes to margin rates. A margin-rate transition can affect liquidation risk even without a Bitcoin price move, as illustrated in Coinbase’s derivatives guidance.
Before estimating a specific position’s liquidation risk, read the current contract and rules for the venue you would use. Check how it defines the mark price, calculates maintenance margin, treats collateral and funding, and handles liquidation and any associated fees. A simple buffer from the entry price cannot reliably account for all of these product-specific factors.
Check the exact product before treating it as perpetual
Product names are not enough to establish that a contract is expiry-free. In its US overview, Coinbase describes its current contracts as “perpetual-style” futures with a five-year term and a stated December 20, 2030 expiry; the overview also describes hourly funding. Those terms are specific to that product and jurisdiction, not a general definition of perpetual futures. Check the latest specification for the exact instrument and confirm that it is available to you in your region.
A practical comparison for a planned trade
- Identify the exposure. Confirm whether you would own Bitcoin, use borrowed funds in spot margin, or hold a derivative contract. For a derivative, check its settlement currency, expiry, and contract multiplier.
- Set the holding period and position size. These determine how many entry and exit fees apply and, for a perpetual, how long funding may accrue.
- Compare all applicable costs. Use the live fee schedule for your account tier and order type. Add expected perpetual funding or, for spot margin, borrowing and rollover charges.
- Check the margin rules if borrowing or using a derivative. Review initial and maintenance margin, margin tiers, collateral treatment, mark-price methodology, and liquidation procedures for that specific venue and contract.
- Verify regional eligibility and current terms. Access to derivatives and the contract rules can vary by jurisdiction. Exchange documentation can change, so use the venue’s current official terms rather than assuming another product works the same way.
This comparison explains instrument mechanics; it does not determine which exposure is suitable for an individual trade.
Quick Recap
Product prices and availability are accurate as of the date/time indicated and are subject to change. Any price and availability information displayed on Amazon at the time of purchase will apply.
