Inverse Perps

Inverse perpetuals are perpetual futures contracts whose underlying index is the inverse of a crypto asset’s price.

Inverse perps can be better for “shorting” than normal perps

On a normal perp:

• To “short BTC,” you open a short position on the BTC perp.

• If BTC doubles (+100%), even a 1x short can be liquidated, because your loss is capped by your initial margin.

On an inverse perp:

• To get downside exposure to BTC, you go long the inverse BTC perp.

• Your position benefits when BTC price falls (since 1/BTC rises).

• Upside risk is structurally different: to liquidate a 1x long inverse position purely from BTC going up, BTC would need to move toward extremely high prices (mathematically, liquidation is pushed toward), making short‑side hedging much more robust to “normal” upside moves.

Concrete example: shorting BTC with normal vs inverse perps

Assume:

• BTC spot price: 40,000 USD

• You want to hedge downside risk (be “short BTC”).

• You use 1x leverage in both cases.

1. Normal perp short

You open a short BTC perp at 40,000 with 1x leverage:

• Position notional: 1 BTC (40,000 USD)

• Collateral: 40,000 USD

• If BTC price drops to 20,000:

  • Your PnL: +50%

  • Your long from .25 → .50 doubles in value: strong profit on BTC downside.

• If BTC goes to 80,000 (+100%):

  • Your PnL: -100% (you lose your entire margin).

  • A +100% move is enough to fully wipe out a 1x short; liquidation typically occurs before that point.

So large upside moves can quickly liquidate your hedge.

2. Inverse perp long (inverse BTC)

You instead use an inverse BTC perp:

• Index at entry: 1/40000= 0.000025 USD

• You go long the inverse perp at price 25 with 1x leverage.

• If BTC price drops to 20,000:

  • New index: 1/20000= 0.000050 USD

  • Your PnL: +100% (could have been +50% on normal perp)

• If BTC price rises to 80,000 (+100%):

  • New index: 1/80000= 0.0000125 USD

  • Your position loses 50% of its value (0.0000250 → 0.0000125), but you are not automatically wiped out at a +100% move the way a 1x normal short is.

To fully liquidate a 1x long inverse position purely from upside, BTC would have to move to extremely high levels; under realistic market conditions, this provides much more room for adverse moves before liquidation.