The introduction of perpetual futures into regulated markets has sparked concerns about systemic risk, with critics warning that these high-leverage instruments could destabilize the market. However, this criticism is misplaced, as the risk is not inherent to the perpetual futures contract itself, but rather a result of the venue's design. The venue's choices, such as leverage caps, margin rules, and default management, are the primary factors that contribute to systemic risk.
The recent deleveraging episodes in the crypto market, including the October 2025 cascade, were caused by a combination of factors, including macro shocks, stablecoin de-pegs, and exchange outages, rather than the perpetual futures contract. The liquidation cascade, which is often triggered by forced liquidations, is a key factor in turning a sell-off into a systemic event. However, this is not a feature of perpetual futures, but rather a result of the venue's design.
The real question is not whether perpetuals belong in regulated markets, but how a given venue is built. Regulatory requirements, such as segregated funds, registered clearing entities, and supervisory oversight, are necessary to establish a baseline level of security. However, the way a venue handles defaults under stress is a separate choice, and it varies even within regulated markets.
Some critics argue that institutions may not want perpetuals at all, citing limited appetite for these instruments due to their speculative nature and lack of term structure. However, this is not necessarily the case, as institutions may use perpetuals to hedge delta, taking advantage of the liquidity they provide. In fact, many institutions trading options on the Bullish Exchange use perpetuals to hedge their directional exposure to the underlying price, not as a replacement for dated futures, but because of the liquidity they offer. The design of perpetuals, which draws in retail flow and concentrates liquidity, is a key factor in their appeal to institutions.
The liquidity edge provided by perpetuals is structural, and it is this overlooked prize that makes them an attractive option for institutions. The debate over perpetuals is not about whether they are dangerous, but about how a venue handles defaults under stress.
Regulated clearing has established a standard for decades, which is also the standard that Bullish is building towards. By containing the systemic risk that critics fear, perpetuals can become a safe and useful tool for institutions. The key is not to eliminate risk entirely, but to break the chain that turns one blown-out account into a market-wide cascade. This can be achieved by designing a venue that contains failures, rather than transmitting them, and by meeting the standards set by regulated clearinghouses.