By the end of the week, traders typically shift their focus from making profits to managing risk, as they cannot adjust their positions until markets reopen on Sunday evening. However, with the emergence of crypto exchanges offering perpetual futures contracts, traders can now hedge their exposure over the weekend. This development has significant implications for the traditional 'weekend effect' in short-dated options, where implied volatility is typically depressed on Fridays. Researchers at Energy Aspects note that the availability of perpetual contracts could lead to a narrowing of the Friday discount in implied volatility, as traders can now hedge their positions over the weekend.
While institutional traders have been slow to adopt perpetual futures, crypto-native firms, proprietary trading shops, and retail traders are driving the growth of this market. The rise of perpetual futures is also providing traders with a new tool to gauge market direction over the weekend, reducing the uncertainty and guesswork that previously characterized weekend trading. As the crypto industry continues to innovate, it may be influencing traditional finance, with perpetual futures potentially becoming one of the first ideas to move from crypto to traditional markets.