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Perpetual futures are one of the most widely traded crypto instruments globally. They allow traders to speculate on price movements without owning the underlying asset, and to use leverage to amplify potential gains and losses. This guide explains what perpetual futures are and what Indian traders need to know.
What are Perpetual Futures?
A perpetual futures contract (or “perp”) is a derivative instrument that tracks the price of a cryptocurrency. Unlike traditional futures contracts, perpetual futures have no expiry date, you can hold them indefinitely.
Key characteristics:
- No settlement date (unlike traditional futures that expire on a fixed date)
- Traders can go long (bet on price rising) or short (bet on price falling)
- Leverage allows traders to control positions larger than their deposited capital
- Funded by a mechanism called the funding rate
How Do Perpetual Futures Work?
Going long: You open a long position if you expect the price to rise. If BTC rises 10% and you have 10x leverage, your position gains 100% of your collateral.
Going short: You open a short position if you expect the price to fall. Shorts allow traders to profit from declining prices.
Leverage: If you deposit ₹10,000 and use 10x leverage, you control a ₹1,00,000 position. Gains are amplified 10x, but so are losses.
Liquidation: If the market moves against your position and your losses approach your collateral, your position is automatically liquidated (closed) to prevent losses beyond your deposit.
Funding rate: A periodic payment exchanged between long and short traders to keep the perpetual contract price close to the spot price. If the funding rate is positive, longs pay shorts. If negative, shorts pay longs.
Example: BTC Perpetual Futures Trade
Scenario: BTC is trading at ₹50,00,000. You deposit ₹1,00,000 as collateral and open a 10x leveraged long position (₹10,00,000 notional value).
- BTC rises 10% to ₹55,00,000: Your ₹1,00,000 gains 100% → new value ₹2,00,000
- BTC falls 10% to ₹45,00,000: Your ₹1,00,000 loses 100% → position liquidated
With high leverage, even small adverse price movements can liquidate your entire position.
Risks of Perpetual Futures
Liquidation risk: Leverage dramatically increases the risk of losing your entire deposited capital.
Funding rate cost: In strongly trending markets, funding rates can be significant. Long positions in a bull market can pay high funding rates that erode returns.
Volatility: Crypto prices are highly volatile. Leveraged positions in volatile markets are extremely risky.
Complexity: Perpetual futures are significantly more complex than spot trading. Misunderstanding margin, leverage, and liquidation can result in unexpected losses.
Counter-party risk: Perpetual futures are offered by exchanges. Exchange risk (hacks, insolvency) is a consideration.
Always conduct your own research before investing. Crypto markets are unpredictable and past trends do not guarantee future returns.
Are Perpetual Futures Available for Indian Traders?
Perpetual futures are offered by several offshore crypto exchanges. The regulatory status of such trading for Indian residents is complex:
- SEBI regulates securities and commodity derivatives in India
- Crypto derivatives are not regulated by SEBI as of 2026
- Offshore platforms offering perps to Indian users may operate in a regulatory grey area
- Tax treatment of derivatives P&L in crypto is unclear and evolving
ZebPay focuses on spot trading for the Indian market. For any derivatives activity, consult a qualified tax and legal professional regarding the applicable rules for your jurisdiction and situation.
Spot Trading vs. Perpetual Futures
| Feature | Spot Trading | Perpetual Futures |
|---|---|---|
| Asset ownership | You own the asset | Derivative, no ownership |
| Leverage | No leverage (ZebPay) | Up to 125x on some platforms |
| Liquidation risk | None | High with leverage |
| Complexity | Low | High |
| Regulatory clarity (India) | Clearer | Less clear |
| Suitability | Beginners to advanced | Advanced traders only |
Frequently Asked Questions About Perpetual Futures
What is a funding rate?
A funding rate is a periodic payment between long and short traders on a perpetual futures exchange. It keeps the perp price aligned with the spot price.
Can I lose more than I invest in perpetual futures?
On most exchanges, your loss is limited to your deposited collateral (no negative balance protection). However, you can lose your entire deposit.
What is a liquidation price?
The price at which your position will be automatically closed due to insufficient collateral. Higher leverage = liquidation price is closer to entry price.
Is futures trading taxable in India?
Crypto derivatives P&L tax treatment is complex and specific guidance is limited. Consult a qualified tax professional.
What leverage should a beginner use?
Beginners should avoid leverage entirely and focus on spot trading first. If you do use leverage, most experienced traders recommend starting with very low leverage (2x or less).
Final Thoughts
Perpetual futures are a powerful tool for experienced traders but carry significant risks that make them unsuitable for most retail investors, especially beginners. For Indian investors new to crypto, spot trading on ZebPay is a simpler, safer starting point.
Get started today and join 6 million+ registered users exploring crypto investing on ZebPay!
Disclaimer: Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions. Each investor must do his/her own research or seek independent advice if necessary before initiating any transactions in crypto products and NFTs. The information in this article is for educational purposes only and does not constitute financial or investment advice.
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