The Rise of Perpetual Futures: How Derivatives Markets Are Shaping Bitcoin and Ether Prices

Most people believe that crypto prices are determined by spot trading, where buyers and sellers meet on an exchange. However, this has not been the case for years, particularly for bitcoin and ether. Perpetual futures, also known as perpetual swaps or 'perps', have become the dominant force in the crypto market, accounting for roughly 93% of all crypto futures volume. These contracts are leverage-friendly, never expire, and can be held indefinitely by paying a funding rate that varies daily. A study in the Journal of Financial Markets found that perpetual swaps on unregulated venues were the strongest instruments for bitcoin price discovery, with regulated futures and US spot exchanges reacting to, rather than leading, these moves. Other research has identified Binance's perpetual market as the primary source of price formation across the fragmented crypto landscape. While the evidence is not conclusive, the direction of the literature over the past few years has been toward the derivatives market as the place where prices are made. Historically, perps have led mostly during bear market price rallies. For example, Bitcoin perps demand growth led the price rallies of January 2026 and April-May 2026. In these periods, spot demand was contracting, while perps demand expanded, thus the perpetual futures market was leading prices despite demand contracting on the spot market. The funding rate is both the tether that keeps the contract anchored and a live readout of sentiment. Some traders watch it as closely as price. The SpaceX use case is a notable example of how perpetual futures can accurately predict prices. Traders on Binance, Coinbase, and other platforms were buying and selling exposure to SpaceX through pre-IPO perpetual futures, which were quoting the equivalent of roughly $170 a share, well above the $135 IPO price set by underwriters. The next day, SpaceX opened at $161, up 19%, and the stock printed almost exactly where the perps had it. The perpetual market was pricing SpaceX well above the IPO price, allowing traders to buy the contract before listing and bet that the two would meet. However, the reason for the subsequent decline in the stock price was due to supply, which the perp could never have priced. Only a sliver of SpaceX's shares were sold at the IPO, and starting around August 6, roughly 900 million locked-up insider shares became eligible to sell. This highlights the limitations of perpetual futures in pricing supply. What SpaceX showed in the extreme is what the research says is already true in ordinary crypto trading — the derivatives market is increasingly where price gets discovered, and spot follows.