The introduction of perpetual futures into regulated markets has sparked concerns about systemic risk, with critics warning that these high-leverage instruments could destabilize the market. However, this criticism is misplaced, as the risk is not inherent to the contract itself, but rather a result of the venue's design. The real issue lies in the venue's choices regarding leverage caps, margin rules, funding design, and default management. These factors can either mitigate or exacerbate systemic risk.

The recent deleveraging episodes in the crypto market, including the October 2025 cascade, were caused by a combination of factors, including macro shocks, stablecoin de-pegs, and exchange outages. The liquidation cascade that followed was facilitated by venue choices, such as manipulable indexes and auto-deleveraging, which are not inherent to perpetual futures. The key to containing systemic risk is not to ban perpetual futures, but to ensure that the trading venue is designed with robust risk management mechanisms, including segregated funds, registered clearing entities, and supervisor oversight. The real question is not whether perpetuals belong in regulated markets, but how a given venue is built to handle defaults and liquidations under stress.

Regulatory requirements can provide a baseline, but the design of the venue is what ultimately determines its safety. Some critics argue that institutions may not want perpetuals at all, citing limited appetite and treating them as speculative instruments rather than a replacement for regulated futures. However, this perspective overlooks the fact that institutions use perpetuals to hedge delta, not as a substitute for dated futures, but because they offer liquidity and flexibility.

The liquidity edge of perpetuals is structural, drawn in by retail flow, and provides a deep, durable pool of liquidity that institutions can tap into. The debate over perpetuals is not about their inherent risk, but about how venues handle defaults and liquidations. Regulated clearing has established a standard for decades, which is also the standard that Bullish is building towards. By containing defaults at their source, rather than transmitting them to the market, venues can break the chain of liquidation cascades and mitigate systemic risk.

This is the key to making perpetuals a safe and useful tool for institutions, rather than a source of systemic risk.