The introduction of perpetual futures into regulated markets has sparked concerns about systemic risk, driven by high-leverage and retail involvement. However, the critique is misguided, as the risk is inherent to the venue's design, not the contract itself.
The venue's choices, such as leverage caps, margin rules, and default management, determine the level of risk. The recent deleveraging episodes in crypto, including the October 2025 cascade, were caused by a combination of factors, including macro shocks, stablecoin de-pegs, and exchange outages. The liquidation cascade, which is usually triggered by forced liquidations, can lead to a systemic event.
Nevertheless, this is not a feature of perpetuals, but rather a result of poor venue design. The real question is how a given venue is built, and whether it meets regulatory requirements, such as segregated funds, a registered clearing entity, and supervisory oversight. The way a venue handles defaults under stress is also crucial.
Institutions may not want perpetuals as a replacement for regulated futures, but they can use them to hedge delta exposure. Perpetuals offer liquidity, which is essential for hedging, and their design draws in retail flow, concentrating liquidity.
The overlooked benefit of bringing perpetuals onshore is the creation of a deep, durable pool of liquidity. The debate around perpetuals is not about their inherent risk, but about how venues handle defaults.
Regulated clearing has established a standard for default management, 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 that turns a blown-out account into a market-wide cascade. This is the difference between a venue that contains a failure and one that transmits it, and it is the key to making perpetuals a safe and useful tool for institutions.