The concept of perpetual futures has become a staple in the crypto financial landscape, yet DRW CEO Don Wilson believes that there are many misconceptions surrounding this product. In a series of posts, Wilson explained that perpetual futures, or 'perps,' are essentially futures contracts that lack an expiration date. The features commonly associated with crypto perpetuals, such as high leverage and auto-deleveraging, are not inherent to the contracts themselves but rather a result of how some crypto exchanges have chosen to implement them.
Wilson emphasized that the characteristics often linked to perpetual futures are, in fact, a result of the technological advancements and design choices made by exchanges, rather than the product itself. His comments come at a time when there is growing interest in introducing perpetual futures into regulated US markets, with several exchanges and market participants exploring the launch of these products beyond the crypto space. Unlike traditional futures markets, crypto exchanges operate continuously and utilize digital collateral, allowing for real-time margin calculations and the offer of products with higher leverage. Wilson argued that these design choices should not be confused with the inherent nature of perpetual futures and that regulators should focus on the economic substance of these products rather than their legal labels.
He also highlighted the benefits of perpetual futures, including the elimination of the need for investors to repeatedly roll over expiring contracts, which reduces transaction costs and allows positions to more closely track the front of the futures curve. Wilson concluded by advocating for the broader availability of perpetual futures across various markets, including commodities, securities, and crypto, and urged regulators to view them as a tool for price discovery and risk management rather than a crypto-specific innovation.