Perpetual Contract vs Delivery Contract: Which Contract Tool is More Suitable for Long Term Holding?

For investors planning to hold positions long-term (weeks to months), expiring futures contracts (quarterly futures) are the better choice. The fundamental reason: expiring futures have no daily funding rate, so your holding cost is largely set at entry. Perpetual contracts, on the other hand, settle a funding rate every 8 hours. In a bull market, longs must constantly pay substantial fees, creating a "slow bleed." If you want to avoid recurring charges and calmly ride a long-term trend, pick expiring futures. Only opt for perpetual contracts if you need maximum flexibility to enter and exit at any time, or if you are primarily shorting for the long haul.

Introduction

The crypto market is notoriously volatile. Beginners often jump in hearing that “futures let you use leverage and go both long and short,” only to quickly get confused by two similar-sounding terms: perpetual contracts and expiring futures (quarterly futures). Some tell you perpetual contracts are the most flexible—open and close anytime. Others swear expiring futures are the only choice for long-term holds because they cost less. So which instrument is actually better for holding a position for the long term?

This article is written from a beginner’s perspective. We will break down the nature of both contract types, their fee structures, real-world examples, and risk considerations to thoroughly answer the question, “Which one should I use for a long-term position?” At the end, you'll find a detailed data comparison table and a FAQ section to clear up any remaining doubts.

1. Perpetual Contracts: The "Rental Agreement" with No Expiration

The defining feature of a perpetual contract (also called a perpetual swap) is that it has no expiration date. Theoretically, you can hold it forever. To keep its price from straying too far from the spot market, exchanges introduced a mechanism called the funding rate.

How the Funding Rate Works

Every 8 hours, a fee is exchanged directly between longs (buyers) and shorts (sellers). If the perpetual contract price is higher than the spot price (typically indicating bullish sentiment), longs pay shorts. If the contract price is lower than spot, shorts pay longs. The rate isn’t fixed; it fluctuates with market sentiment. During extreme conditions, a single funding payment can reach 0.1%–0.3% of your position or even more.

Think of it like renting an apartment: the landlord always owns the property, and you pay rent every month. You never own the asset itself. In a perpetual contract, you hold "price exposure." As long as you keep the position open, you keep paying (or possibly receiving) funding fees.

Pros and Cons of Perpetual Contracts

• Pros: Extremely high liquidity; the most traded crypto derivative globally. No expiration means no need to manually roll over positions. Great for scalping, day trading, hedging, and high-frequency strategies.

• Cons: The funding rate is highly unpredictable, making long-term holding costs uncertain. In a bull market, longs can see substantial profits silently eaten away by fees. Even if the price eventually hits your target, the cumulative funding paid out can massively eat into your final return.

2. Expiring Futures: A "Rent-to-Own" Deal with a Set Date

Expiring futures (often called quarterly or dated futures) have a fixed settlement date—weekly, bi-weekly, quarterly, or bi-quarterly. When they expire, the contract is settled in cash (or sometimes physically delivered) at a price based on the average spot index over a period before expiration. The contract then ceases to exist.

Basis – The Pricing Logic of Expiring Futures

There is usually a price difference between an expiring futures contract and the spot market. This is called the basis. For example, if Bitcoin spot is $60,000 and the quarterly futures contract is trading at $61,200, the basis is 2%. You can think of this 2% as the premium the market assigns to future expectations—and it’s your fixed cost to hold that contract until expiry. Because the futures price must converge to the spot price at expiration, that 2% is a deterministic, known cost upfront.

It's similar to a rent-to-own home agreement. You’re making payments toward eventual ownership. You know the total cost of the deal, and as long as you meet the terms, the final outcome (cash settlement or ownership equivalent) is clear.

Pros and Cons of Expiring Futures

• Pros: No funding rate. Your holding cost is represented entirely by the basis at entry, giving you cost certainty. Perfect for multi-week or multi-month trend trades and for basis arbitrage.

• Cons: They have an expiration date. If you want to maintain exposure, you must roll over the position near expiry (close the expiring contract and open a new one with a later date). Liquidity dries up as expiry approaches, which can cause slippage. Available maturities are limited; the longest are typically quarterly, so holding longer than three months requires rolling.

3. Long-Term Holding Costs – The Deciding Factor

For long-term holders, what truly determines net profitability is often not the entry/exit taker fees (which are usually minimal), but the ongoing holding costs: the funding rate or the basis.

The Hidden Cost of Perpetuals

Suppose you go long 1 BTC worth of perpetual contracts at $60,000, planning to hold for 3 months. The market leans bullish, with an average funding rate of 0.03% per 8-hour session (roughly 0.09% per day). Over 90 days, the total funding paid would be:
1 BTC × $60,000 × 0.09% × 90 = $4,860
That's 8.1% of your position’s notional value! And this is just a moderately bullish estimate. In a true bull frenzy, rates can be much higher. Worse still, this fee is deducted directly from your margin balance. As your margin shrinks, your liquidation price creeps closer, potentially forcing you to add more collateral.

The Fixed Cost of Expiring Futures

For the same long exposure, you buy a quarterly futures contract (expiring in about 3 months) at $61,200. The basis is 2%, costing you $1,200. That’s your fixed holding cost. At expiry, as long as the price hasn't fallen, that 2% is the only extra cost. Even if the spot price stays flat for three months, your maximum loss is limited to that basis. There's no slow bleed of your margin from daily fees.

What if You Are Shorting Long-Term?

When shorting, the situation flips. A short position in a perpetual contract during a bull market will receive funding fees from the longs. Holding a short becomes an interest-generating position, making perpetuals extremely friendly to long-term shorts. With expiring futures, a short doesn't pay funding either, and if the basis is positive (futures premium), you sold at a premium, and the convergence works in your favor. Both are good for shorts, but a perpetual short can be exceptionally profitable.

However, "long-term holding" usually implies a bullish, long position, so we'll keep the focus on longs for this analysis.

4. Rollover Risk and Operational Complexity

Some argue that expiring futures require rolling over, which is a hassle and may add costs—making them unsuitable for beginners. In reality, most major trading platforms now offer auto-rollover features or, at minimum, advance warnings. The operational burden is much lower than it used to be.

Here’s what rollover can look like:

• In a contango market (back-month contracts are more expensive than front-month), you close the near-expiry contract and open the next one, absorbing a new basis. But as expiry nears, the front-month basis shrinks to near zero. The new, farther-dated basis simply becomes the next period's known cost. Overall, it's manageable.

• In a backwardation market (farther contracts are cheaper—a spot premium), rolling over can actually generate a credit. This is less common in crypto but can occur during panic selling.

Compared to the unpredictability of perpetual funding rates, the cost of rolling over futures is relatively easy to anticipate. For ultra-long-term holders (6 months plus), you might need to roll 2–3 times. With a little planning, it’s far less stressful than watching your account get drained every 8 hours.

5. Data Comparison Table

The table below compares both instruments across several dimensions for a long-term long position.

6. FAQ

1. Are trading fees the same for perpetual and expiring futures?

Yes. The taker/maker fees you pay to open and close a position are typically identical on the same exchange. The difference lies in the holding period costs: perpetuals add an extra funding rate.

2. Everyone says perpetuals are more convenient for holding long-term. Is that true?

They are more convenient in the sense that you never have to think about rolling over. That "convenience" is great for a short-term trade lasting a few hours or a couple of days. But for a position held for weeks or months, the accumulated funding fees often eclipse that convenience, severely eating into your profits.

3. What happens if I hold an expiring futures contract until settlement without closing it?

The exchange will automatically cash-settle it. Your unrealized P&L is calculated based on the average index price leading up to expiration, and the position is closed. If you want to keep the exposure, you must manually open a new position on a later-dated contract.

4. Just how high can perpetual funding rates get? What’s the annual cost?

There’s no fixed limit. For Bitcoin during a moderately bullish trend, average daily funding might be 0.03%–0.1%, annualizing to roughly 11%–36%. In an extreme bull run, some altcoin perpetuals can show annualized rates exceeding 100%. These fees are deducted continuously and shrink your principal over time.

5. I want to hold a long-term short position. Which contract type is better?

For a long-term short, the advantages of perpetuals flip. If the market maintains bullish sentiment, you, as the short, will receive those funding payments from longs. This can turn your position into an interest-earning one. An expiring futures short also avoids funding costs and benefits from positive basis convergence, but the perpetual's "passive income" from funding is often more attractive. So, for a dedicated long-term short, perpetual contracts can be the more lucrative choice.

6. Why is the price gap between Bitcoin perpetual and quarterly futures sometimes so large?

Perpetuals are dynamically balanced by the funding rate, while quarterly futures prices embed the cost of carry and time-based expectations. When market greed is extreme, both the perpetual funding rate spikes and the quarterly futures basis widens. They reflect different market dimensions, so a gap is normal. It usually won't be severely mispriced for long, as arbitrageurs would step in to close the spread.

7. As a beginner, how should I start with long-term futures trading?

Start very small. Use a quarterly futures contract, buy a tiny notional amount, and experience the full lifecycle: build the position, hold through some market swings, and then either let it cash-settle or manually roll it over. Record the basis cost. Feel the difference of not having a funding fee drain. Once you deeply understand basis and rolling, you can then decide whether to experiment with perpetuals for shorter-term or hedging strategies. Always use light leverage (no more than 3x) and set strict stop-losses.

Summary

If you are a bullish long-term investor willing to hold for weeks or months to capture a macro trend, an expiring futures contract is almost always the rational choice. Your cost is fixed up front as a visible basis. There is no constant drain from 8-hour funding payments. You only need to handle one rollover every few months and can otherwise let the trade ride in peace. That cost certainty is critical for any long-term strategy.

If your outlook is bearish and you intend to hold a long-term short, the perpetual contract might become your weapon of choice, thanks to the ability to collect funding payments. And for pure day traders scalping intraday moves, the infinite lifespan and deep liquidity of perpetuals are irreplaceable.

Ultimately, whichever tool you pick, keep your leverage conservative. The biggest enemy of a long-term position is rarely the fees—it’s forced liquidation from over-leveraging. Execute your plan with manageable costs and a clear understanding of the mechanism, and you’ll be in a far better position to last in the crypto market.