The introduction of perpetual futures into regulated markets has sparked concerns about systemic risk, with critics warning that these high-leverage instruments could destabilize the market. However, this criticism is misplaced, as the risk is not inherent to the contract itself, but rather a result of the venue's design. The true risk lies in the venue's choices, such as leverage caps, margin rules, and default management. The recent deleveraging episodes in the crypto market, including the October 2025 cascade, were caused by a combination of factors, including macro shocks, stablecoin de-pegs, and exchange outages.
The liquidation cascade that followed was exacerbated by venue choices, such as manipulable indices and auto-deleveraging. These features are not inherent to perpetual futures, but rather a result of poor venue design.
The real question is not whether perpetuals belong in regulated markets, but how the venue is built. Regulatory requirements, such as segregated funds and a registered clearing entity, are necessary to secure the baseline.
However, the way a venue handles a default under stress is a separate choice, and it varies even within the regulated perimeter. A more valid concern is that institutions may not want perpetuals at all.
A recent JPMorgan note found limited institutional appetite for perpetuals, citing their speculative nature and basis risk. However, this criticism misses the point, as institutions are not using perpetuals as a replacement for regulated futures, but rather as a tool to hedge delta. The liquidity provided by perpetuals is a key factor, as many of the institutions trading options on Bullish's venue use perpetuals to hedge their directional exposure. The design of perpetuals, with no expiry and continuous tradability, draws in retail flow and concentrates liquidity.
This liquidity edge is structural and provides a deep, durable pool of liquidity that institutions can use safely. The debate over perpetuals is not about their inherent risk, but about how venues handle defaults. Regulated clearing has established a standard for decades, which is also the standard that Bullish is building towards.
By containing defaults at their source, rather than transmitting them to the market, venues can break the chain that turns a blown-out account into a market-wide cascade. This is the difference between a venue that contains a failure and one that transmits it, and it is the transmission that critics fear.
By meeting this standard, perpetuals can become infrastructure that institutions can use, rather than a hazard that critics describe.