Spot vs Perpetual Futures: What You're Actually Trading

A spot trade buys the actual token — it lands in your wallet and can't be liquidated. A perpetual future is a contract tracking the asset's price; you never hold the token, and the position can be liquidated if it moves against your margin.

Key differences: leverage (perps let you control 10x+ size with less capital — gains and losses both multiply), funding rates (perps pay a periodic fee between longs and shorts to anchor the contract price to spot — a real cost of holding), and custody (spot assets sit in your wallet; perp collateral sits on the exchange).

Liquidation is the core perp risk: if the position's value falls enough that your margin can't cover the loss, the exchange force-closes it — you lose the margin, not just unrealized P&L.

Rule of thumb: spot for holding and long-term conviction; perps for short-term directional trades where you understand the funding cost and can size positions so liquidation isn't catastrophic.