Perpetual Futures Dominate Bitcoin and Ether Markets, Proving Their Influence

The notion that spot trading is the primary driver of crypto prices is no longer accurate. Instead, perpetual futures, also known as perps, have become the dominant force in the market, accounting for approximately 93% of all crypto futures volume. These contracts, which never expire, allow traders to buy and sell with leverage, and their daily volume often surpasses that of the underlying spot market. Research has consistently shown that perps are the primary source of price discovery for bitcoin, with studies indicating that they lead the market, while spot exchanges react to their movements. The funding rate, a key component of perps, serves as a tether to the underlying price and provides a live readout of market sentiment. A notable example of the influence of perps is the SpaceX IPO, where traders on Binance, Coinbase, and other platforms were able to accurately predict the company's valuation using pre-IPO perpetual futures, outperforming traditional Wall Street estimates. This phenomenon highlights the growing importance of derivatives in the crypto market, where perps are driving price discovery, and spot trading is following their lead.