The concept of perpetual futures has become a cornerstone of the crypto financial landscape, but according to DRW CEO Don Wilson, common perceptions about this product are misguided. Wilson recently expressed his views on the matter through a series of online posts, where he emphasized that perpetual futures, or 'perps,' are essentially futures contracts that lack an expiration date. The characteristics often linked to crypto perpetuals, such as high leverage and continuous trading, are not inherent to the contracts themselves but rather a result of how certain crypto exchanges have chosen to implement them. Wilson stressed that the features associated with perpetual futures in the crypto space, like auto-deleveraging and high leverage, should not be confused with the fundamental nature of the contracts.
He pointed out that these features are a result of the technological capabilities of crypto exchanges, which allow for real-time margin calculations and digital collateral. This has enabled the offering of products with higher leverage and alternative liquidation mechanisms. However, Wilson argued that these design choices do not define perpetual futures and that regulators should focus on the economic substance of these contracts rather than their legal classification. He suggested that the true innovation of perpetual futures lies in their ability to eliminate the need for frequent contract rollovers, thereby reducing transaction costs and allowing for more accurate tracking of the futures curve.
Wilson advocated for the broader adoption of perpetual futures across various markets, including commodities, securities, and crypto, and urged regulators to view them as a valuable tool for price discovery and risk management, rather than a product unique to the crypto space.