Updated 2026-07-23
What is a perpetual future?
A perpetual future (often shortened to perp) is a derivatives contract that lets a trader take leveraged long or short exposure to an asset's price, most commonly crypto, without ever owning the underlying coin and without the contract ever expiring. It behaves like a standard futures contract in almost every other way: you post margin, you choose leverage, and your profit or loss scales with the size of the position.
The one design choice that separates it from a traditional future is right there in the name. A quarterly future has a settlement date; a perpetual does not. That single difference is why perps became the dominant way to trade crypto with leverage: a trader never has to roll a position forward or plan around an expiry date, they just hold the contract for as long as they want.
No expiry: how does that actually work?
A dated future converges to the spot price automatically as expiry approaches, because at settlement the contract simply becomes the spot price. A perpetual has no such deadline to force that convergence, so exchanges built a different mechanism to keep the perp's price from drifting too far from spot indefinitely: the funding rate.
Instead of a one-time settlement, perps settle a small payment between longs and shorts on a recurring schedule, typically every 1 to 8 hours depending on the exchange. That payment is what tethers the perpetual's price to the underlying spot market over time, replacing the single expiry-day convergence event with a continuous, small, repeated one. See Funding Rate Explained for the full mechanics of who pays whom and why.
Mark price vs. last price: the distinction that decides liquidations
Every perp has two prices moving at once, and mixing them up is one of the most common sources of trader confusion. Last price is simply the price of the most recent trade on that exchange's order book, the number you see ticking on a standard candle chart. Mark price is a smoothed, manipulation-resistant estimate of fair value, usually built from an index of spot prices across several exchanges plus a small basis adjustment.
- Last price can be pushed around briefly by a single large order, a thin order book, or a one-exchange wick.
- Mark price is designed to resist exactly that kind of momentary distortion by referencing a broader index.
Exchanges use mark price, not last price, to calculate unrealized P&L and to trigger liquidations. This is why a position can get liquidated even when the candle chart you're staring at never appears to touch your stop level: the liquidation engine was watching a different, index-based number the whole time.
Leverage and the liquidation price
Leverage lets a trader control a position larger than their posted margin. In exchange for that amplification, the position carries a maintenance margin requirement: the minimum equity that must remain in the position before the exchange force-closes it to prevent the account from going negative. Your liquidation price is the mark price at which your remaining margin equals that maintenance threshold.
The math is intuitive even without the formula: higher leverage means a smaller slice of margin is backing a larger position, so a smaller adverse move eats through that margin and the liquidation price sits closer to entry. Lower leverage gives the position more room to breathe before the same outcome. This is exactly why leverage choice, not just direction, determines how much a trader can tolerate normal volatility without being forced out.
Why perps are the instrument behind the liquidation map
Every cluster of potential liquidation activity shown on a liquidation Money Map exists because of the mechanics above. Traders open leveraged perp positions, each position has a liquidation price determined by its entry, leverage, and the mark price at the time, and open interest accumulates at price levels where many traders' liquidation prices happen to sit close together.
When mark price reaches one of those clustered levels, positions there get forced closed, and the forced closing itself can push price further, sometimes triggering the next nearby cluster. That chain reaction is what a liquidation heatmap or liquidation map is trying to visualize: not a prediction of where price is going, but a descriptive picture of where existing leveraged perp positions become vulnerable. For the visual side of this, see Liquidation Heatmap Explained and Liquidation Map Explained.
Reading perp mechanics honestly, not as a signal
It's tempting to treat funding rate, open interest, or a liquidation cluster as a directional signal on its own, a way to "predict" where price will go next. That framing overstates what these numbers can tell you. Funding rate tells you who is crowded and paying to stay in a trade right now. Open interest tells you how much leveraged exposure exists. A liquidation cluster tells you where existing positions are structurally exposed if price gets there.
None of that is a forecast. Hunter Killer's approach is to keep this distinction explicit: the Money Map and the underlying accuracy work published on /proof are built as a descriptive, walk-forward-tested read of positioning, with per-symbol sample sizes and confidence intervals shown alongside the numbers, not a black-box call on future price. Understanding how perps actually work, mark price, funding, leverage, and liquidation thresholds, is what makes that descriptive read useful in the first place.