The concept of perpetual futures has become a cornerstone of crypto finance, but according to DRW CEO Don Wilson, many common assumptions about them are misguided. In a series of posts, Wilson clarified that perpetual futures, or 'perps,' are essentially futures contracts without an expiration date. Characteristics often linked to crypto perpetuals, such as high leverage and auto-deleveraging, are not inherent to the contracts but rather a result of how some crypto exchanges have chosen to implement them.
Wilson emphasized that the features associated with perpetual futures in crypto are not a reflection of the product itself but rather a result of the technological and design choices made by exchanges. As interest in integrating perpetual futures into regulated US markets grows, Wilson's comments come at a pivotal time. Several exchanges are exploring the launch of perpetual futures beyond crypto, but regulatory questions persist.
Wilson argued that the real innovation of perpetual futures lies in their ability to eliminate the need for repeated contract rollovers, thereby reducing transaction costs and allowing for more precise tracking of the futures curve. He urged regulators to focus on the economic substance of perpetual futures rather than their legal classification, suggesting that they should be treated as futures, not swaps, regardless of their lack of expiration date. Ultimately, Wilson advocates for the broader adoption of perpetual futures across various markets, including commodities, securities, and crypto, viewing them as a valuable tool for price discovery and risk management.