The introduction of perpetual futures into regulated markets has sparked concerns about systemic risk, driven by high-leverage retail trading. However, this criticism is misdirected, as the risk is inherent to the trading venue's design, not the perpetual futures contract itself. The venue's choices, such as leverage caps, margin rules, and default management, determine the level of risk. The recent crypto market deleveraging episodes, including the October 2025 cascade, were caused by a combination of factors, including macro shocks, stablecoin de-pegs, and exchange outages.
The liquidation cascade, which depresses prices and triggers further liquidations, is a key risk transmission mechanism. However, this is not a feature of perpetual futures, but rather a result of venue design.
The real question is how a given venue is built, with regulatory requirements providing a baseline for segregated funds, registered clearing entities, and supervisory oversight. The handling of defaults under stress is a separate choice, varying even within regulated markets.
A sharper objection to perpetual futures is that institutions may not want them, citing limited appetite and preferring regulated futures. However, institutions use perpetual futures to hedge delta, not as a replacement for dated futures, due to their liquidity. The design of perpetual futures draws in retail flow, concentrating liquidity and creating a deep, durable pool of liquidity.
This liquidity edge is structural, and what allows institutions to use it safely is institutional-grade default management. The question is not whether perpetual futures are dangerous, but how a venue handles defaults under stress. Regulated clearing has established a standard for containing systemic risk, which is also the standard Bullish is building towards. By starting with the defaulter and working off positions through the order book or auction, and having a pre-funded guaranty fund, the clearing model breaks the chain that turns a blown-out account into a market-wide cascade.
This design difference is what determines whether a venue contains or transmits risk, and meeting this standard makes perpetual futures infrastructure that institutions can use.