The introduction of perpetual futures to regulated markets has sparked concerns about systemic risk, but this criticism is misdirected. The risk associated with perpetual futures is not inherent to the contracts, but rather a result of the venue's design, including factors such as leverage caps, margin rules, and default management.
The recent episodes of deleveraging in the crypto market, including the October 2025 cascade, were caused by a combination of macro shocks, stablecoin de-pegs, exchange outages, oracle failures, over-leverage, and thin liquidity. However, it is the liquidation cascade, which is often triggered by venue choices such as manipulable indices and auto-deleveraging, that turns a sell-off into a systemic event. The real question is not whether perpetual futures belong in regulated markets, but how a given venue is designed and built.
Regulatory requirements, such as segregated funds, registered clearing entities, and supervisory oversight, are necessary to establish a baseline level of security. However, the way a venue handles defaults under stress is a separate choice that can vary even within regulated markets. A more valid concern is that institutions may not want perpetual futures at all, as they may be seen as speculative rather than a replacement for regulated futures.
A recent JPMorgan note found limited institutional appetite for perpetuals, citing their lack of term structure and basis risk. However, institutions are using perpetuals to hedge delta, not as a substitute for dated futures, but because they offer liquidity.
The design of perpetuals, which includes no expiry, no roll, and continuous tradability, draws in retail flow and concentrates liquidity. This liquidity edge is structural and can be safely utilized by institutions with proper default management.
The debate over perpetual futures is not about their inherent risk, but about how venues handle defaults and contain systemic risk. Regulated clearing has established a standard for decades, which is also the standard that Bullish is building towards. By containing defaults at their source and preventing liquidation cascades, perpetuals can become a safe and useful tool for institutions.