The US market has finally seen the arrival of on-chain perpetual contracts. What does this mean?

Author: Vaidik Mandloi; Source: TokenDispatch; Compiled by: Shaw, Jinse Finance

The total trading volume of perpetual contracts (Perps) exceeded $90 trillion last year. To put it in perspective, this trading volume is higher than the combined GDP of the world's top ten countries.Currently, perpetual contracts account for about three-quarters of the total trading volume of crypto derivatives, and their growth rate leads most financial categories in history.

Even with such a massive market size, US institutions had previously been unable to conduct related transactions in compliance with regulations, but this situation was changed last Friday.

On May 29, the U.S. Commodity Futures Trading Commission (CFTC) approved Kalshi to launch the first compliant Bitcoin perpetual contract in the United States; on the same day, regulators also gave Coinbase permission to connect its users with global perpetual contracts and options products through Deribit. Following this news, Hyperliquid's platform token HYPE surged by 30%. For reference, Hyperliquid is currently the largest on-chain perpetual contract exchange by volume, and the platform was not originally open to U.S. users. CFTC Chairman Michael Selig published an op-ed on CoinDesk, stating that perpetual contracts are "a fundamental tool for risk management and price discovery in the global crypto asset market." Anyone who has been deeply involved in the crypto industry for some time and witnessed this series of implementations firsthand will be deeply impressed. Let's break down the profound significance of this event. What are perpetual contracts? How did their trading volume exceed $90 trillion? The concept of perpetual contracts originated in 1993 when Nobel laureate economist Robert Shiller published a paper first proposing futures products with no expiration date. His initial design was that homeowners could use this derivative to hedge against the risk of falling house prices without having to sell their properties. While this concept was quite innovative, it lacked the conditions for implementation at the time. At that time, the entire derivatives market adopted a settlement system based on expiration dates, with clearinghouses and margin risk control systems built around fixed settlement dates. For example, agricultural futures settled on fixed monthly dates, while treasury bond futures settled on interest payment dates. The lack of supporting infrastructure kept this idea buried in academic literature for decades. In May 2016, the three founders began a trial run in their Hong Kong studio: Arthur Hayes, Ben Delo, and Sam Reed improved upon Shiller's original concept, founding BitMEX. The platform launched Bitcoin futures with no expiration date, added a funding rate mechanism pegged to the spot market price, and supported leverage trading up to 100x. Within just 18 months of its launch, BitMEX topped the list of cryptocurrency derivatives exchanges. So what exactly are perpetual contracts? And how do they work? Conventional futures contracts bet on the price of an underlying asset on a specific expiration date. For example, a Bitcoin futures contract expiring in June 2026 will be settled at the spot price in June; to continue holding the position, one must roll over to the next contract. The drawback is that each rollover incurs transaction fees and can create gaps in open positions. Perpetual contracts, on the other hand, completely eliminate the expiration and settlement rule. Once opened, a position can be held indefinitely, with traders deciding when to close it. Holding periods can range from as short as five minutes to as long as several months. Conventional futures rely on expiration and settlement to naturally converge with the spot price, but perpetual contracts have no settlement date, therefore relying on funding rate mechanisms to anchor the market price and correct for price differences. One major reason for the popularity of perpetual contract exchanges is that traditional exchanges distribute liquidity across four quarterly contracts (March, June, September, and December), while perpetual contracts concentrate all liquidity in a single order book. This makes perpetual contracts a top-tier trading venue in terms of efficiency. In financial markets, high efficiency creates a compounding effect: the more traders there are, the narrower the bid-ask spread becomes, attracting even more traders to the market. The annual trading volume of offshore perpetual contracts surged from $28 trillion in 2023 to over $90 trillion in 2025; the growth rate of on-chain perpetual contracts on decentralized exchanges was even more rapid, with trading volume skyrocketing by 346% in 2025 alone, reaching $6.7 trillion. On a typical day, the daily trading volume of perpetual contracts is approximately 10 to 15 times that of spot trading. This means that the center of gravity for asset price discovery has shifted from the spot market to the derivatives market: every Tuesday afternoon when Bitcoin experiences a 5% price fluctuation, the movement almost always originates from perpetual contracts. Large-scale leveraged positions triggering consecutive liquidations passively spurred both long and short selling and bargain hunting, causing spot prices to fluctuate accordingly. As the saying goes, the tail pulls the body; the entire core derivatives market, which determines the pricing of crypto assets, had previously been completely blocked from US institutions. What does this mean for the US market? The US has finally legally opened up perpetual contract trading, but the products offered are not the same as those used globally. Even Coinbase needs to transfer data through its Bermuda subsidiary to the Deribit platform in Dubai—years of stringent regulations have forced industry liquidity to remain overseas, making it difficult to flow back to the US in the short term. The leverage limit for compliant US perpetual contracts is approximately 10x, and they are fully protected by the CFTC's segregation of funds system; in contrast, traders in offshore markets generally use leverage of 50-100x. With 100x leverage, $1 of principal can leverage a $100 position, and a 10% fluctuation in the underlying asset can double the principal. Under the same market fluctuations, option returns are far lower than perpetual contracts because buying options requires upfront premium payments, the cost of which is already factored into expected volatility, and there is also daily time value decay during the holding period; a typical one-month Bitcoin call option typically yields only about 3 times the return under the same 10% price fluctuation. Leverage is the core competitive advantage of perpetual contracts, and the US-based version of the product is much more conservative in its leverage rules. This is also why Hyperliquid's platform token HYPE surged on the day the CFTC approved compliant perpetual contracts in the US. Many initially predicted that funds would flow from Hyperliquid to Kalshi and Coinbase, and that compliant platforms with institutional funds would erode Hyperliquid's existing market share. However, Hyperliquid's revenue last year reached $907 million, with no US users contributing any transactions throughout the process. Consider the user profiles of these two platforms: a trader using 50x leverage to short Meme at 3 AM would never open an account on Kalshi and trade Bitcoin with only 10x leverage; institutions requiring compliant segregated funds would never choose Hyperliquid in the first place. Their product positioning is completely different, targeting two entirely different customer groups. The essence of the regulatory implementation is that the CFTC officially recognizes the legitimacy of the perpetual cryptocurrency track that Hyperliquid is deeply involved in, which is a solid compliance endorsement for Hyperliquid. Furthermore, due to regulatory constraints, compliant platforms in the US can currently only list Bitcoin perpetual tokens, while Hyperliquid has already transcended the cryptocurrency category. Leveraging the HIP-3 proposal, anyone can launch perpetual contracts for any asset class, and many are already in live trading: silver perpetual contracts saw daily trading volume exceeding $4 billion during the peak of the February market rally, and crude oil perpetual contracts briefly surpassed Bitcoin perpetual contracts in trading volume during April. Jeffrey Sprecher, CEO of Intercontinental Exchange (ICE), the parent company of the NYSE, stated at the Bernstein Industry Summit two days before the CFTC's approval: "Many people haven't heard of Hyperliquid, but this platform is already larger than Nasdaq." Now, ICE is actively engaging with Hyperliquid, researching its business model, and inquiring with regulators about why traditional exchanges cannot launch similar products. The industry's learning trend has completely reversed: Wall Street giants are beginning to study this decentralized exchange, which was only two years old and has not received any venture capital funding, simply because it has built a trading infrastructure that leading global exchanges are vying to replicate. Perpetual contracts will penetrate all asset classes. I believe this compliance implementation is of profound significance, primarily because perpetual contracts are no longer limited to the cryptocurrency field. Initially used only for Bitcoin trading, perpetual contracts gradually covered all altcoins; then extended to commodities such as gold, silver, crude oil, and natural gas; further expanded to stocks like Nvidia and Tesla; and equity in companies planning IPOs like SpaceX and OpenAI; now, relying on HIP-4, it has extended to the prediction market category. In just two years, perpetual contracts have evolved from an innovative feature in the crypto world into a financial instrument that can be linked to any global asset, traded 24/7, with no expiration date and no need for clearing intermediaries. Traditional derivatives were born in the era when exchanges closed at night, and were reasonable in the era of manual order placement and paper-based settlement. However, in today's globalized digital infrastructure, assets circulate around the clock, and markets with segmented opening hours are prone to trading gaps. Oil traders looking to position themselves in anticipation of weekend geopolitical events face difficulties on compliant traditional exchanges, whereas such trades have long been available on Hyperliquid, a fact officially recognized by the CFTC. The agency's official guidelines for 24/7 trading explicitly state: "Derivatives linked to crypto assets, leveraging their digital infrastructure and global circulation, are naturally suited for 24/7 continuous trading." The real competition now lies in whether US-regulated trading platforms can accelerate their iterations and maintain their market share. For example, centralized exchanges charge an average of about 4 basis points for futures trading, while Hyperliquid charges only 2 basis points; the difference is even greater for spot trading, with the former charging 15 basis points and the latter only 5. Switching platforms takes only minutes, naturally drawing traders to venues with lower fees. In the week following the CFTC's approval, Compass Point analysts gave Coinbase a sell rating, arguing that the influx of competitors into the derivatives market would weaken the platform's pricing power and compress profit margins. In Q1 2026, Coinbase's perpetual contract revenue reached $50 million, while retail spot trading revenue fell to its lowest level since Q3 2024. While the perpetual business continues to expand, it is constantly eroding the higher-margin spot business. In fact, the narrowing of industry profits manifests in many ways. If investors can leverage any asset to go long or short anytime, anywhere, with no expiration restrictions on positions, the attractiveness of traditional derivatives declines significantly. For example, since perpetual contracts can seamlessly roll over positions, why frequently switch between quarterly futures contracts? Admittedly, in extremely crowded market conditions, funding rates can exceed rollover costs, reaching as high as 2% every eight hours in extreme cases. Traditional exchanges also have an incentive to retain quarterly futures, as rollover operations generate two transactions and two rounds of commission revenue. However, most retail investors only hold positions for a few hours or days, and the no-expiration design is simpler for them. Similarly, since perpetual contracts can achieve similar long/short leverage, why buy short-term options? While it's undeniable that option losses are capped at the premium cost, actual trading volume reveals market preferences: in 2025, the average daily trading volume of S&P 500 zero-day options (0DTE) was 2.3 million contracts, with the vast majority of trades simply betting on price movements. For this type of demand, perpetual contracts have a lower barrier to entry. I am not asserting that perpetual contracts will completely replace options and traditional futures; options offer advantages that perpetual contracts cannot replicate, such as fixed loss caps and convex returns. However, for the vast majority of traders who rely solely on leverage to bet on price fluctuations, perpetual contracts offer better value and lower costs. The success of this product is evidenced by data: annual trading volume exceeding $90 trillion is the best proof.