Authors: Ryan Weeks, Spe Chen, Muyao Shen, Bloomberg reporters
Compiled by Jiahuan, ChainCatcher
On the last Saturday of February this year, when the United States and Israel launched airstrikes on Iran, the global oil markets were closed, but crude oil prices did not stop moving.
On Trade.xyz, built on the crypto trading platform Hyperliquid, traders spent the entire weekend buying and selling an on-chain oil derivative. By the time traditional futures markets reopened, on-chain traders had already spent hours pricing in the potential impact of the conflict.
For decades, modern financial markets have operated around a shared framework: recognized trading venues, fixed trading hours, and benchmark prices that serve as references for other markets. The crypto market breaks this convention. It operates 24/7, easily crosses borders, and is increasingly filling the gaps left when traditional exchanges are closed.
Trade.xyz is one of the prime examples testing how far this change can go.
The startup’s team consists of only about a dozen people, yet within less than a year, they launched perpetual contracts linked to crude oil, precious metals, stock indices, and private companies such as SpaceX. Since its launch in October last year, these markets have generated approximately $500 billion in trading volume, accounting for over 99% of the total trading activity on Hyperliquid’s third-party market system, HIP-3.
This achievement has prompted Trade.xyz and Hyperliquid to pursue more ambitious goals. They are lobbying U.S. regulators to allow pre-initial public offering (IPO) perpetual contracts to enter the U.S. market, arguing that such products can enable more robust price discovery before a company goes public, thereby modernizing the traditional IPO process.
Currently, Hyperliquid operates outside the United States and is not officially open to U.S. traders, and the same restriction applies to Trade.xyz.
However, Hyperliquid appears to have secured an important ally. Last week, U.S. President Trump, who supports the cryptocurrency industry and whose family is deeply involved in related businesses, stated that regulators are exploring how to allow Hyperliquid to enter the U.S. market.
Unlike traditional futures contracts that settle on a fixed date, perpetual contracts have no expiration date. Investors can hold positions long-term without needing to repeatedly roll expiring contracts into new ones. These products may also offer very high leverage, with some platforms allowing investors to borrow $100 for every $1 invested.
Walter Li, who previously worked as an ETF trader at Royal Bank of Canada and now primarily manages his personal trading portfolio through Trade.xyz, says there’s “always some part of the market in a bull phase.”
He added that if a popular asset class has not yet been brought onto the blockchain, Trade.xyz can create a market for it.
Bloomberg's analysis of Trade.xyz contracts during the U.S.-Iran conflict showed that, during periods of relatively mild volatility, these contracts largely tracked traditional oil prices; when traditional markets were closed, they also reflected traders' market sentiment in real time.
However, during some of the most volatile periods of the conflict, Trade.xyz contract price movements were smaller than the fluctuations seen after traditional markets resumed trading.
Trade.xyz uses a mechanism called "price discovery boundaries" to limit extreme price movements during periods of high market volatility. As the market has matured, the platform has gradually relaxed these restrictions.
A spokesperson for Trade.xyz said the purpose of this mechanism is to allow the market to discover prices while preventing weekend market manipulation.
The participants and sources of liquidity for these weekend contracts differ from those in the traditional crude oil futures market used for comparison. Several professional oil traders stated that they view these contracts as indicators of market sentiment, but not necessarily as predictive tools for the reopening prices of Brent or West Texas Intermediate crude.
Trade.xyz was developed by Unit Labs, whose team members mostly use pseudonyms. According to insiders, Unit Labs received investment from the venture capital firm Paradigm over a year ago. Spokespersons for Unit Labs and Paradigm declined to comment on the transaction.
Today, Trade.xyz's operations have deeply penetrated traditional financial markets.
In March this year, Trade.xyz, in collaboration with S&P Global, launched what they call the first officially licensed perpetual contract linked to the S&P 500 Index. The current open interest value of this product is approximately $450 million. Trade.xyz also offers perpetual contracts tracking the Nasdaq 100 Index.
The largest markets under HIP-3, all developed by Trade.xyz, are linked to the S&P 500 index, SK Hynix stock, and gold, with a combined open interest value of approximately $1.2 billion.
Regulatory challenges brought by round-the-clock trading
Before Hyperliquid launched the HIP-3 system, perpetual contracts linked to assets like stocks already existed, but HIP-3 significantly accelerated the market’s shift toward global distribution and 24/7 trading.
Professor Yesha Yadav of Vanderbilt University Law School, who specializes in digital asset research, says that Wall Street regulators, accustomed to markets trading only on weekdays, “must now confront the possibility that liquidity has migrated to other markets and price discovery is occurring in offshore markets, particularly during traditional market holidays.”
Collins Belton, Chief Operating Officer and General Counsel at Unit Labs, said at an industry conference this July that this emerging field is facing a government that is “very willing to provide support.” He had expected more concern from institutions and regulators.
This has also led to a conflict with regulators and the world's largest derivatives exchange, CME Group.
In June of this year, CME sued the U.S. Commodity Futures Trading Commission and its chair, Michael Selig, over guidance issued by the commission, which was seen as paving the way for U.S. platforms to launch crypto perpetual contracts.
At the time, the U.S. Commodity Futures Trading Commission issued a statement calling the lawsuit "baseless."
SpaceX's pre-IPO pricing experiment
Compared to oil contracts, contracts on private companies fill a different type of market gap.
Companies like SpaceX do not have publicly traded stock prices prior to going public; their valuations are typically determined based on funding rounds and secondary market transactions, which may be months apart.
The perpetual contracts offered by Trade.xyz and its competitors do not grant traders ownership of the underlying company's stock. Since these companies are not publicly listed, there are no publicly traded securities available to directly arbitrage and anchor the contract prices.
The purpose of these contracts is to publicly reflect traders' assessments of the company's value prior to its listing.
So far, the pre-listing perpetual contracts on Trade.xyz have accurately predicted the opening performance of the related stocks. In several major stock listings this year, including SpaceX and SK Hynix, these contracts indicated in advance that the stock prices at the official start of trading would be higher than the offering price set by the underwriting banks.
David Schamis, CEO of Hyperliquid Strategies, said:
A group of market participants who had never actually seen the company’s stock made a more accurate prediction of the opening price than the underwriting syndicate, which had spent two weeks promoting the offering.
In a letter dated August 18 to U.S. Securities and Exchange Commission Secretary Vanessa Countryman, Trade.xyz, along with a lobbying group associated with Hyperliquid, cited the prior performance of pre-listing perpetual contracts, arguing that such products can provide public market signals prior to a company’s listing, thereby improving the IPO pricing process.
High leverage amplifies abnormal volatility
High leverage also quickly exposed problems in this emerging market.
In mid-June this year, shortly after SpaceX shares began trading, a short squeeze on the Trade.xyz perpetual contract linked to Musk’s rocket and satellite company temporarily pushed its implied valuation to $3 trillion, surpassing Amazon or Microsoft at the time.
Over $50 million in short positions were automatically liquidated as a result.
About a month later, the same market mechanism caused an abnormally large inverse price movement in the Trade.xyz perpetual contract linked to SK Hynix.
After the contract dropped 20%, holders were forced to close nearly $60 million in long positions. Previously, SK Hynix shares had plunged as much as 30% in pre-market trading. The decline was triggered by a single-share trade on the Nextrade market that executed at a suspected abnormal price.
Trade.xyz stated that it will compensate for losses caused by the abnormal price fluctuations of SK Hynix.
The platform said: “In the future, we will further improve our pricing system to respond to extreme events.”
Liquidity becomes a competitive barrier
To launch a perpetual futures market on Hyperliquid, the operator must stake 500,000 HYPE tokens, which is currently worth approximately $39 million.
Some early entrants have shut down their operations. Meanwhile, new competitors backed by institutions such as Multicoin Capital and Hyperion DeFi are targeting markets where Trade.xyz has not yet established dominance.
Skew’s Hyperion-supported initiative focuses on developing pricing data that is “hard to replicate.” Hyunsu Jung, CEO of Hyperion, said this will become the platform’s differentiating direction.
However, Trade.xyz's liquidity remains a difficult barrier to overcome. This advantage stems from the platform launching new markets earlier and offering lower fees than its competitors.
Although Trade.xyz's perpetual contracts reached a total trading volume of $10.7 billion in July this year, data aggregated by DefiLlama shows that, at current levels, its annualized revenue is only approximately $27 million.
Pratik Kala, portfolio manager at the digital assets hedge fund Apollo Crypto, said:
I wouldn’t even look at other markets. Liquidity is the most important thing, and liquidity in other markets is very poor. If I want to place an order of even $500,000, the bid-ask spread would widen rapidly.
Yadav said that a potential risk brought by Trade.xyz's rapid growth is large-scale liquidations similar to those seen in SpaceX and SK Hynix perpetual contracts, which could potentially spill over into traditional markets in the future.
In the worst-case scenario, a market crash over the weekend could plunge institutions holding traditional financial assets into a "balance sheet crisis."
She said: "By Monday morning, will they still have enough funds to continue trading in traditional markets? That’s where the potential danger lies."
In contrast, former ETF trader Walter Li is more concerned about missing trading opportunities while sleeping.
He said he used ChatGPT to design a monitoring system that scans market activity on Trade.xyz, and sends him alerts whenever the activity of any perpetual contract traded 24/7 increases.
If you’ve set up the right monitoring system and truly know what to look for, you don’t need to sit at your trading desk all the time.