The introduction of perpetual futures to regulated markets has sparked concerns about systemic risk, but the focus is misplaced. The risk is not inherent to the contract itself, but rather a result of the venue's design, including factors such as leverage caps, margin rules, and default management.
The recent deleveraging episodes in crypto, including the 2025 cascade, were caused by a combination of macro shocks, stablecoin de-pegs, and exchange outages, which were exacerbated by liquidation cascades. However, these cascades are not a feature of perpetual futures, but rather a result of venue choices, such as manipulable indexes and auto-deleveraging.
The real question is not whether perpetuals belong in regulated markets, but how a given venue is built and managed. Regulatory requirements, such as segregated funds and registered clearing entities, are necessary to secure the baseline, but the handling of defaults under stress is a separate choice that varies even within regulated markets. Institutions may not want perpetuals as a replacement for regulated futures, but they can be used for delta hedging due to their liquidity. The design of perpetuals draws in retail flow, which concentrates liquidity, making them a valuable tool for institutions.
The key to safe usage is institutional-grade default management, which contains systemic risk. The question is not whether perpetuals are dangerous, but how a venue handles defaults under stress. Regulated clearing has established a standard for decades, and Bullish is building towards this standard.
By containing defaults at their source, rather than transmitting them to the market, the chain of risk can be broken, making perpetuals a viable infrastructure for institutions.