The popularity of perpetual futures, a staple in the crypto trading world, has been undeniable, with trading volumes reaching $1 billion within a week of launch. These contracts, also known as 'perps,' have become a cornerstone of global crypto trading, with estimates suggesting an annual volume of around $90 trillion.
Unlike traditional futures contracts, perps do not expire, and traders are not required to close or roll over their positions. Instead, periodic funding payments keep the contract price aligned with the underlying asset. Following regulatory approval, Kalshi and Coinbase have been cleared to offer regulated perpetual futures in the US.
However, despite the growing interest, large financial institutions are exercising caution, opting to study the product rather than launching it immediately. Proprietary trading firms, market makers, and newer clearing firms are expected to be the first movers, as they have more freedom to test new venues and accept operational risks. The potential applications of 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 that need to be addressed before perps can gain widespread acceptance. As the market continues to evolve, a competitive debate is emerging, with incumbent exchanges seeking to protect their existing businesses and new players looking to capture market share.