The traditional Wall Street trading week, which typically ends on Friday afternoon, is being disrupted by the growing presence of crypto markets. As a result, traders are no longer forced to wait until Sunday evening for markets to reopen, but can instead trade derivatives contracts called 'perpetual futures' on crypto exchanges. This shift is changing the way traders approach risk management and hedging over the weekend, and may ultimately lead to a more efficient and liquid market. Researchers at Energy Aspects note that the dynamics of short-dated West Texas Intermediate crude options are set to change due to the growth of perpetual futures on crypto exchanges, which could lead to a reduction in the 'weekend effect' where implied volatility falls on Fridays.
While institutional traders have been slow to adopt perpetual futures due to liquidity concerns and infrastructure issues, the volume of perps linked to traditional assets has increased significantly over the past few months. The rise of perpetual futures is also providing traders with a new tool to gauge market direction over the weekend, and may ultimately influence traditional markets. As the crypto industry continues to innovate, it is likely that traditional finance will be influenced by these developments, and the lines between the two will become increasingly blurred.