The perpetual futures market, a staple in the crypto industry, is now entering the US regulated market, with trading volumes reaching $1 billion within a week of launch. Despite its popularity, Wall Street banks are adopting a wait-and-see approach, citing the need for mature liquidity, rules, and infrastructure. The product, also known as 'perps', allows traders to hold positions without expiration dates, making periodic funding payments to keep the contract price in line with the underlying asset.
With an estimated annual volume of $90 trillion, perps have become a core part of global crypto trading. However, big banks are hesitant to commit, due to stricter capital rules, client obligations, and reputational risk, leaving the field open to proprietary trading firms, market makers, and newer clearing firms.
The potential use cases for perps extend beyond speculation, as they could help traders manage weekend risk and provide a source of price discovery. Nevertheless, the market faces regulatory challenges, with debates over whether perpetual contracts should be treated as futures or swaps, and incumbent exchanges protecting their existing businesses.
As the market continues to evolve, Wall Street's view remains cautious, with the largest banks waiting for the rules, liquidity, and infrastructure to catch up before making a significant move.