KoinlyticsSpot and perp are the two big categories of crypto trading. Both trade ETH-USDC, but what you actually own differs completely. Understand the difference or you will find out the expensive way.
Spot trading
You give USDC, you receive ETH. Now you own ETH. You can send it, use it in DeFi, hold it for a decade. The only variable is price. Simple mental model.
- Max loss: 100% (ETH goes to zero)
- No time pressure
- No leverage (unless you borrow against the ETH elsewhere)
- No funding fees
Perpetual contracts (perps)
You do not own ETH. You own a contract that tracks ETH's price with three complications: leverage, funding, and liquidation.
Leverage
You post $1,000 as collateral and take a $10,000 position. That is 10x leverage. Your PnL is calculated on the full $10,000. A 5% ETH move = $500 = 50% of your collateral. A 10% adverse move = liquidation.
Funding
Perp price is designed to track spot price. When more longs than shorts want the position, funding rate becomes positive: longs pay shorts every 8 hours. Rate can spike to 0.1% per 8 hours (100%+ annualized) during volatile periods. That is a real cost that eats into your position.
Liquidation
If your position moves against you enough to threaten your collateral, the exchange closes it forcibly at whatever price is available. In fast-moving markets, that price is often much worse than you would expect, and the resulting loss can exceed your posted collateral (on some venues, though most crypto perp exchanges cap it at collateral).
Comparing them side-by-side
When perps make sense
- Hedging spot exposure — Short perp against your held ETH to lock in price
- Delta-neutral basis trading — Long spot + short perp when funding is positive, harvest funding
- High-conviction directional bet on short timeframe — Where leverage is a tool, not a habit
When perps destroy you
- Using 10x+ leverage on assets you do not have a strong thesis on
- Ignoring funding rate costs over multi-day holds
- Not setting stop losses
- Adding to losing positions
The uncomfortable data
Retail perp traders lose money at a rate above 80% over any 6-month window. That is not a marketing claim, it is what centralized exchanges publish (the ones that publish stats). Perps are a tool for sophisticated risk management or for professional traders. For everyone else, they are the fastest way to zero.
The rule
Never use more leverage than you would use on a real business decision. If a 30% adverse move would ruin you, you are overleveraged. Spot for holding, perps for hedging or specific tactical bets.