What Is a ‘Perpetual Swap’ and How Does It Relate to Cash-Settled Futures?

A perpetual swap, or perpetual future, is a derivative contract that resembles a futures contract but has no expiration date. It is a key innovation in the crypto derivatives space.

Like a cash-settled future, it settles in cash. The crucial difference is the 'funding rate' mechanism, which periodically adjusts the price of the perpetual swap to keep it tethered to the underlying spot price, mimicking the convergence that occurs in traditional expiring futures.

This makes it highly liquid and attractive for continuous trading.