The concept of perpetual futures has become a cornerstone of crypto finance, but according to DRW CEO Don Wilson, common perceptions about them are misguided. In a series of posts, Wilson clarified that perpetual futures, or 'perps,' are essentially futures contracts without an expiration date.
The characteristics often linked to crypto perpetuals, such as high leverage and auto-deleveraging, are not inherent to the contracts themselves but rather a result of how some crypto exchanges have chosen to implement them. Wilson emphasized that the features associated with perpetual futures in the crypto space should not be confused with the fundamental nature of these contracts.
His comments come at a time when there is growing interest in introducing perpetual futures into regulated US markets, with several exchanges exploring their launch beyond the crypto sphere. Wilson advocates for a distinction between the design choices of exchanges and the inherent properties of perpetual futures, suggesting that the real innovation of perpetual futures lies in their ability to eliminate the need for repetitive contract rolling, thus reducing transaction costs and allowing for more accurate tracking of market movements. He urges regulators to focus on the economic substance of perpetual futures rather than their legal classification, arguing that they should be treated as futures rather than swaps due to their economic nature.
Ultimately, Wilson believes that perpetual futures should be made available across a broader range of markets, including commodities, securities, and crypto, as a tool for price discovery and risk management.