The US introduction of perpetual futures, a popular crypto trading product, has sparked significant interest. Following the Commodity Futures Trading Commission's approval, Kalshi and Coinbase are among the first to offer these contracts, with Kalshi's perpetual futures reaching $1 billion in trading volume within a week. Perpetual futures, also known as perps, are similar to standard futures contracts but lack an expiration date, eliminating the need for traders to close or roll over positions.
Instead, periodic funding payments maintain the contract's price close to the underlying asset. With estimated annual volume of $90 trillion, perps have become a core component of global crypto trading. However, large financial institutions are adopting a wait-and-see approach, studying the product rather than preparing for major launches, due to stricter capital rules and reputational risk. In contrast, proprietary trading firms, market makers, and newer clearing firms are more likely to be the first movers.
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 lack of depth and regulatory clarity are significant challenges, with the treatment of perpetual contracts as futures or swaps being a key point of contention. As the market continues to evolve, the debate is becoming increasingly competitive, with incumbent exchanges protecting their existing businesses. For now, Wall Street's approach is cautious, with the largest banks waiting for the rules, liquidity, and infrastructure to mature before committing to the market.