The concept of perpetual futures has become a cornerstone of the cryptocurrency market, yet DRW CEO Don Wilson believes that common perceptions surrounding this financial product are misguided. In a series of posts, Wilson clarified that perpetual futures, or 'perps,' are essentially futures contracts without an expiration date, with characteristics such as high leverage and auto-deleveraging being specific to how certain crypto exchanges have chosen to implement them. As interest in integrating perpetual futures into regulated US markets grows, Wilson's comments come at a pivotal time. He emphasized that the unique features of crypto exchanges, such as continuous operation and real-time margin calculation, have enabled the offering of products with higher leverage, but these should not be conflated with the inherent nature of perpetual futures.
Instead, Wilson advocates for a focus on the economic substance of these contracts, arguing that they should be treated as futures rather than swaps due to their elimination of the need for rolling contracts, thereby reducing transaction costs and allowing for more accurate tracking of the futures curve. He urges regulators to reconsider their stance and make perpetual futures available across a broader range of markets, recognizing their potential as a tool for price discovery and risk management.