The popularity of perpetual futures in the crypto space has been undeniable, with trading volumes reaching $90 trillion annually, according to Bank of America estimates. Now, with the introduction of regulated perpetual futures in the US, Wall Street is weighing the potential risks and rewards of this trading product.
Unlike traditional futures contracts, perpetual futures do not expire, eliminating the need for traders to close or roll over positions. Instead, periodic funding payments keep the contract price aligned with the underlying asset. The Commodity Futures Trading Commission (CFTC) has cleared Kalshi and Coinbase to offer regulated perpetual futures, paving the way for other exchanges to follow suit.
However, large financial institutions are adopting a cautious approach, opting to study the product rather than launch it immediately. Proprietary trading firms, market makers, and newer clearing firms are more likely to be the first movers, as they have more flexibility to test new venues and accept operational risks. 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.
Nevertheless, the lack of depth and regulatory clarity are significant hurdles that need to be addressed before institutional investors commit to this market. As the regulatory landscape evolves, it is likely that perpetual futures will become an integral part of traditional markets, but for now, Wall Street's approach remains cautious.