Article by: Vaidik Mandloi
Compiled by Saoirse, Foresight News
Perpetual contracts (Perps) surpassed $90 trillion in annual trading volume last year, exceeding the combined GDP of the top ten economies worldwide. Today, perpetual contracts account for three-quarters of all crypto derivatives trading volume, growing faster than any financial instrument in modern history.
However, prior to this, no institution within the United States was legally permitted to offer perpetual contracts—a deadlock that was broken last Friday. On May 29, the U.S. Commodity Futures Trading Commission (CFTC) approved Kalshi’s listing of the nation’s first compliant Bitcoin perpetual contract; on the same day, regulators permitted Coinbase to direct its users to global perpetual and options products via the Dubai-based Deribit platform.
After the news broke, HYPE, the platform token of Hyperliquid—the leading on-chain perpetuals platform—surged 30% in the short term. Hyperliquid is currently the largest decentralized perpetuals exchange globally and has never opened its services to U.S. users. Michael Selig, Chair of the CFTC, published a column in CoinDesk defining perpetual contracts as “an indispensable risk management and price discovery tool for the global crypto asset market.” Those in the crypto industry witnessing this regulatory shift firsthand can’t help but feel deeply struck—below is a detailed breakdown of its profound significance.
What is a perpetual contract? How did it grow to a $90 trillion size?
The conceptual precursor to perpetual contracts emerged in 1993, when Nobel laureate Robert Shiller published a paper proposing a futures contract with no expiration date, allowing homebuyers to hedge against declines in housing prices without having to sell their properties.
Source: WSJ
Although the concept held theoretical value, the conditions for implementation were entirely immature due to the derivatives market regulations at the time. Throughout the industry, all futures contracts had fixed expiration and delivery dates, with clearing systems and margin risk controls entirely built around settlement upon expiration; agricultural futures settled monthly, and bond futures were tied to coupon payment dates. The industry lacked the underlying infrastructure necessary to support perpetual products, and as a result, this theory remained confined to academic literature for decades thereafter.
In May 2016, Arthur Hayes, Ben Delo, and Sam Reed founded BitMEX in Hong Kong, implementing an enhanced version of the Shiller perpetual contract concept: launching Bitcoin futures with no expiration date, introducing a funding rate mechanism to anchor prices to the spot market, and supporting leverage of up to 100x. Within 18 months of launch, BitMEX became the world’s leading cryptocurrency derivatives exchange.
How Perpetual Contracts Work
Traditional futures contracts specify a fixed delivery date; for example, a Bitcoin futures contract expiring in June 2026 will be forcibly settled at the market price in June. Traders wishing to maintain their position must roll over to the next contract cycle. Frequent rollovers incur transaction costs and can create gaps in position exposure.
Perpetual contracts eliminate expiration mechanisms entirely, allowing users to hold positions indefinitely and choose to close them at any time, whether after five minutes or five months. Without an expiration-based forced liquidation mechanism tied to the spot price, funding rates continuously adjust to narrow the spread between the contract and spot prices, ensuring the contract price remains aligned with the underlying asset’s true market conditions.
Source: Paradigm.xyz
The core advantage behind the rapid rise of perpetual exchanges: Traditional futures split liquidity across four quarterly contracts—3-month, 6-month, 9-month, and 12-month—while perpetual contracts consolidate all liquidity into a single order book, significantly outperforming in trading efficiency. Financial markets exhibit an efficiency compounding effect: the more traders participate, the narrower the bid-ask spread becomes, further attracting additional capital.
Offshore perpetual trading volume surged from $28 trillion in 2023 to over $90 trillion in 2025; decentralized on-chain perpetuals grew even faster, reaching $6.7 trillion in trading volume in 2025, a staggering 346% year-over-year increase. In daily trading, perpetuals account for 10 to 15 times the daily volume of spot markets, with derivatives now fully dominating cryptocurrency pricing: most 5% daily price movements in Bitcoin originate from the perpetual market, where leveraged liquidations trigger cascading sell-offs or buying surges, forcing spot prices to follow suit.
Before this round of U.S. regulatory compliance was implemented, the perpetual futures market, which controlled global pricing, remained closed to U.S.-based institutions.
The U.S. approves perpetuals—what changes does this bring to the industry landscape?
Although the U.S. has legalized perpetual contracts, domestic compliant products are not the same category as those in the global offshore markets. Even Coinbase must route user orders through its Bermuda subsidiary to Deribit in Dubai; offshore markets have accumulated massive liquidity over years of regulatory gray areas and are unlikely to return to the U.S. in the short term.
In the U.S. compliant market, perpetual leverage is capped at 10x, and client funds are fully protected under the CFTC’s customer asset segregation rules. In contrast, offshore markets typically offer 50x to 100x leverage: with 100x leverage, a $1 initial investment can control a $100 position, meaning a 10% price movement in the underlying asset can double the capital or wipe it out entirely. For the same 10% market move, a standard one-month Bitcoin call option would yield only about 3x profit, due to the upfront payment of premium and time decay. High leverage is the core selling point of offshore perpetuals, while U.S. compliant products feature conservative risk controls and fundamentally different characteristics.
This was also key to HYPE’s price surge despite the market downturn following CFTC compliance: Initially, the market widely feared that funds would flow from Hyperliquid to U.S.-compliant platforms like Kalshi and Coinbase—but this did not happen. Hyperliquid generated $907 million in annual revenue last year with zero U.S. users. The two user groups are naturally distinct: retail speculators opening 50x leveraged short positions on meme coins at 3 a.m. won’t migrate to U.S. platforms to trade Bitcoin at 10x leverage; institutional investors requiring compliant custody and asset segregation never intended to join Hyperliquid in the first place.
The U.S. regulatory clearance essentially confirms that Hyperliquid’s perpetual futures market is legally recognized, providing a fundamental boost to the platform.
Currently, compliant U.S. exchanges are only approved to list Bitcoin as a single underlying asset for perpetual contracts, while Hyperliquid has long moved beyond the crypto space: leveraging the community-governed proposal HIP-3, anyone can list perpetual contracts on any asset class on the platform, with multiple instruments already trading live. In February, silver perpetuals reached a daily trading volume of $4 billion, and in April, crude oil perpetuals briefly surpassed Bitcoin in阶段性 trading volume.
Jeffrey Sprecher, CEO of Intercontinental Exchange (ICE), the parent company of the New York Stock Exchange, stated at the Bernstein Industry Conference ahead of the CFTC’s approval: “The company we’re talking about, Hyperliquid, is already larger than Nasdaq.” Now, ICE’s team has proactively reached out to Hyperliquid to learn its product architecture and is questioning regulators on why traditional exchanges cannot replicate similar products. Wall Street is beginning to reverse-learn from a decentralized exchange that is only two years old and has received no venture capital funding.
Perpetual contracts are eating into the traditional derivatives market across all categories.
The deeper impact of this round of regulatory implementation is that perpetual contracts are no longer confined to the crypto sphere but are now fully penetrating all categories of financial markets.
Product evolution path: From native Bitcoin, expanded to a full range of altcoins; then extended to commodities such as gold, silver, and crude oil; further broadened to include individual stocks like NVIDIA and Tesla, as well as equity in private companies like SpaceX and OpenAI; leveraging the HIP-4 proposal, the platform has now launched perpetual prediction markets.
Source: EBC Financial Group
In just two years, perpetual contracts have evolved from a niche innovation in the crypto space into a standardized financial product that enables 24/7 trading, has no expiration date, eliminates intermediate clearing steps, and tracks any global asset. Traditional derivatives were born in an era of manual, floor-based trading, with exchanges operating on fixed daily closing hours and contract structures designed to align with paper-based settlement rules.
In today’s always-on, globally connected digital markets, traditional assets with fixed trading hours naturally create market gaps: oil traders seeking to position themselves before weekend geopolitical events have no corresponding trading tools available in traditional regulated exchanges, whereas Hyperliquid enables immediate position opening. The CFTC’s official survey summary explicitly states that crypto-linked derivatives, leveraging digital infrastructure and global accessibility, are inherently suited for 24/7 continuous trading.
The next focus of industry competition: Can U.S.-compliant traditional exchanges rapidly iterate their products to retain market share? Fee comparison: Traditional centralized exchanges charge approximately 4 basis points for futures trading, while Hyperliquid charges only 2 basis points; for spot trading, traditional platforms charge 15 basis points, whereas Hyperliquid drops as low as 5 basis points. Users can switch platforms in just minutes, and capital naturally flows toward lower-cost venues.
In the week it was approved for launch, Compass Securities analysts downgraded Coinbase to "Sell," citing intensified competition in the derivatives market, which continues to erode the platform's pricing power and profit margins. In Q1 2026, Coinbase's perpetuals business generated $50 million in revenue, while retail spot trading revenue fell to its lowest level since Q3 2024: the expansion of perpetuals volume has consistently diverted revenue from higher-margin spot trading.
The profit logic for all types of derivatives has been compressed by perpetuals: with perpetual contracts, investors avoid the frequent rollover of quarterly futures (which incurs double fees each time); most short-term traders hold positions for only hours to days, and the experience of perpetuals without expiration far surpasses that of traditional contracts requiring periodic rollovers.
Short-term options also face substitution pressure: both short-dated options and perpetuals enable directional leveraged trading, with the only advantage of options being the capped loss limited to the premium. In 2025, the average daily volume of 0DTE single-day options in the U.S. stock market reached 2.3 million contracts, with the vast majority of trades speculating solely on short-term price movements—demand that can be fully absorbed by perpetuals at lower costs.
This article does not claim that perpetual contracts will completely replace options and traditional futures, as options uniquely offer capped losses and nonlinear payoffs that perpetuals cannot replicate. However, for the largest segment of the market—short-term leveraged speculation—perpetual contracts, with their low cost and no expiration date, provide a superior solution, as evidenced by their annual trading volume of $90 trillion, which confirms their market value.