How Perpetual Futures Dominate Bitcoin and Ether Markets, and What SpaceX Taught Us

The process of setting crypto prices is often misunderstood, with many believing it is driven by spot trading, where buyers and sellers meet on an exchange. However, for years, perpetual futures have played a much larger role in determining prices for bitcoin, ether, and the broader crypto market. These contracts, also known as perpetual swaps or 'perps,' are leverage-friendly and never expire, accounting for roughly 93% of all crypto futures volume. Daily perp volume often surpasses the spot market, demonstrating their significant influence. A key difference between traditional futures contracts and perps is the absence of a settlement date in the latter, meaning their prices are not forced to meet the spot price of the underlying asset. Instead, perps can be held indefinitely by paying a funding rate that varies daily. Research has shown that derivatives markets, particularly perpetual swaps on unregulated venues, are often the first to discover bitcoin prices, with regulated futures and U.S. spot exchanges reacting to these moves. A study published in the Journal of Financial Markets found that perpetual swaps were the strongest instruments for bitcoin price discovery. Other research has identified Binance's perpetual market as a primary source of price formation in the crypto landscape. Although the evidence is not conclusive, with some studies suggesting spot markets still lead at certain frequencies or during times of stress, the direction of recent literature points towards derivatives markets as the primary price discovery mechanism. Historically, perps have led mostly during bear market price rallies. For example, Bitcoin perps demand growth led price rallies in January and April-May 2026, despite spot demand contracting. The funding rate, which is paid by the crowded side of the trade every few hours, serves as both an anchor to the underlying price and a live readout of market sentiment. Some traders closely watch the funding rate, but others view it as just another data point to interpret, rather than a source of new information. The funding rate can also eat into a trader's profit and loss while they wait for their directional position to play out. A unique use case for perps was seen in the pre-IPO trading of SpaceX, where traders bought and sold exposure to the company through perpetual futures contracts before its record $75 billion initial public offering. These contracts were structured to track an implied valuation rather than a share price. The first mover was Hyperliquid, which listed a synthetic SpaceX perpetual on May 18, followed by Binance, Coinbase, and other exchanges. The striking aspect was how accurately these perpetuals priced the stock before its listing, with Hyperliquid and Binance quoting the equivalent of roughly $170 a share, well above the $135 IPO price set by underwriters. On the first day of trading, SpaceX's stock opened at $161, up 19%, and almost exactly where the perps had priced it. This demonstrated that a market dominated by leverage-seeking retail traders could read first-day demand more accurately than the banks that spent months building the offering price. However, the perpetual market's inability to price supply was evident when SpaceX's stock fell more than 40% from its June peak, after locked-up insider shares became eligible to sell. This example highlights what research has shown: the derivatives market is increasingly where price discovery occurs, and spot markets follow. Perps excel at pricing demand but are blind to supply, a crucial consideration during bitcoin rallies or flushes that start in the funding rate before reaching spot.