The popularity of perpetual futures in the crypto space has been undeniable, with trading volumes reaching staggering heights. Now, as these contracts make their way into regulated American markets, Wall Street is weighing the potential risks and benefits. With an estimated annual volume of $90 trillion, according to Bank of America, perpetual futures have become a staple in global crypto trading. The Commodity Futures Trading Commission's (CFTC) recent approval of Kalshi and Coinbase to offer regulated perpetual futures in the US has sparked interest, but large financial institutions are adopting a wait-and-see approach.
Proprietary trading firms, market makers, and newer clearing firms are more likely to be the first movers, as they have more freedom to test new venues and accept operational risk. The potential use cases for perpetual futures extend beyond speculation, as they could help traders manage weekend risk and provide a source of price discovery.
However, the lack of depth and regulatory clarity are significant hurdles to overcome. As the market continues to evolve, industry insiders predict that firms won't commit balance sheet until customer activity justifies it, and the demand for perpetual futures must be there to attract capital.
The regulatory fight is also heating up, with questions surrounding the treatment of perpetual contracts as futures or swaps, and the potential expansion into commodities, equities, and other traditional markets. For now, Wall Street's view is cautious, with the largest banks unlikely to lead the charge, instead waiting for the rules, liquidity, and infrastructure to catch up.