The concept of perpetual futures has become a cornerstone of crypto's financial landscape, yet DRW CEO Don Wilson believes that much of the existing knowledge about them is misguided. In a series of social media posts, Wilson explained that perpetual futures, or 'perps,' are essentially futures contracts without an expiration date. The characteristics commonly associated with 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 often linked to perpetual futures are a product of the exchanges' design choices, not the contracts themselves. His comments come at a time when there is growing interest in introducing perpetual futures into regulated US markets.
Several market participants have explored launching perpetual futures beyond the crypto space, but questions remain about how these products should be regulated. Wilson argued that the technological differences between traditional futures markets and crypto exchanges have allowed for the creation of products with higher leverage and alternative liquidation mechanisms.
However, he stressed that these design choices should not be confused with the fundamental nature of perpetual futures. Instead, Wilson believes that digital payment systems can improve risk management by enabling real-time settlement and reducing the need for large initial margin buffers. He also urged regulators to focus on the economic substance of perpetual futures rather than their legal labels, arguing that they should be treated as futures contracts rather than swaps.
Ultimately, Wilson advocated for the broader adoption of perpetual futures across various markets, including commodities, securities, and crypto, as a tool for price discovery and risk management.