Author: Vaidik Mandloi
Compiled by: Block unicorn
Last year, trading volume for perpetual futures contracts (perps) exceeded $90 trillion. For comparison, that's more than the combined GDP of the world's top ten countries. Today, perpetual futures account for about three-quarters of all cryptocurrency derivatives trading, growing faster than almost any other financial product in history.
Even so, until last Friday, no U.S.-based institution could legally trade these contracts. On May 29th, the U.S. Commodity Futures Trading Commission (CFTC) approved Kalshi to list the first regulated Bitcoin perpetual futures contract in U.S. history. On the same day, the CFTC also approved Coinbase to direct its clients to global perpetual and options trading via the Deribit platform.
Following the announcement, the price of Hyperliquid's HYPE token surged 30%. For reference, Hyperliquid is currently the largest on-chain perpetual futures exchange, but it does not serve U.S. users. CFTC Chairman Michael Selig wrote in a CoinDesk op-ed that perpetual contracts are "a foundational tool for risk management and price discovery in the global crypto asset markets." If you've been around in crypto for a while, seeing all this unfold in front of your eyes does feel somewhat unbelievable. Let me explain why this is so significant.
How Did Perpetual Futures Accumulate $90 Trillion?
It all started in 1993 when Nobel Prize-winning economist Robert Shiller published a paper proposing a futures contract that never expires. His idea was that homeowners could use such a contract to hedge against falling house prices without having to sell their homes.
The concept was interesting but had no practical application at the time because the entire derivatives market operated on an expiration settlement model, with clearinghouses and margin models designed for fixed-date settlements. For example, agricultural contracts settled monthly, and bond futures had coupon payment dates. There simply was no supporting infrastructure, so the concept lay dormant in academic journals for decades.
Then, in May 2016, three founders in Hong Kong decided to give it a try. Arthur Hayes, Ben Delo, and Sam Reed launched BitMEX, their concept being a modification of Shiller's original idea. They built a Bitcoin-based futures contract with no expiration date and added a mechanism to peg its price to the underlying market, allowing users to trade with leverage up to 100x. Within just 18 months, BitMEX became the largest cryptocurrency derivatives exchange.
So, what exactly is a perpetual futures contract, and how does it work?
In an ordinary futures contract, you bet on the price of an underlying asset on a specific date. For example, a Bitcoin futures contract expiring in June 2026 will settle at the price in June when the time comes. If you want to keep your position, you must buy the next contract. The problem is that each contract rollover incurs costs and creates gaps in your position.
Perpetual futures, on the other hand, do away with the expiration date entirely. You can open a position, and it remains open until you close it. The duration can be as short as five minutes or as long as five months. The key is that ordinary futures contracts naturally converge to the spot price at expiration. Perpetuals do not, so something else is needed to ensure price accuracy. For this, they use a funding rate.
One reason perpetual exchanges have become so popular is that, unlike traditional exchanges which fragment liquidity across quarterly contracts (March, June, September, December), perpetual exchanges concentrate all trading on one platform with a single order book. This makes perpetual exchanges one of the most efficient places to trade, and in financial markets, efficiency tends to compound. More traders lead to tighter spreads, which in turn attracts more traders.
Offshore derivatives volume grew from $28 trillion in 2023 to over $90 trillion in 2025. On-chain derivatives volume on decentralized exchanges grew even faster, surging 346% in 2025 alone to $6.7 trillion. Moreover, on any given day, derivatives volume is roughly 10 to 15 times the spot volume. This means price discovery for assets has shifted from spot markets to derivatives markets. When Bitcoin moves 5% on a Tuesday afternoon, that move almost always starts in derivatives trading. The cascading effect of leveraged positions triggers liquidations, leading to buying and selling, and the spot market follows.
The "tail wagging the dog" phenomenon is happening; the very part of the market that truly determines prices—the heart of the crypto market—has, until now, completely shut out U.S. institutions.
What Does This Mean for the United States?
The U.S. finally has perpetual futures, but it doesn't have access to the same product the rest of the world trades. Even Coinbase's own operation requires funds to be routed via its Bermuda subsidiary to Deribit in Dubai because liquidity accumulated offshore over years of regulatory hostility and can't be brought back overnight.
U.S. traders are limited to leverage of about 10x and enjoy full segregation protections from the CFTC; offshore traders, in contrast, use leverage multiples of 50x to 100x. 100x leverage means $1 controls $100 of exposure. A 10% price move can deliver a 10x return. Returns on an options contract for the same price move are much lower because the upfront option premium already prices in some expected volatility, and the position decays over time. A typical one-month Bitcoin call option might return about 3x for the same 10% price move. Leverage is the key, and U.S. leverage is still relatively tame.
This is why Hyperliquid's stock price soared on the day the CFTC legalized previously illegal trading. The first reaction for many was that volume would shift from Hyperliquid to Kalshi and Coinbase, and regulated platforms with institutional capital would eat into Hyperliquid's accumulated market share.
Hyperliquid generated $907 million in revenue last year without a single U.S. user. Think about it, who is trading on these platforms? The person shorting a memecoin 50x at 3 AM is not going to open a Kalshi account to short Bitcoin 10x. Institutional investors who need regulated, segregated custody were never using Hyperliquid. These are products for entirely different populations. The CFTC's move essentially validates the product category Hyperliquid dominates. For Hyperliquid, this is a validation of its worth.
Despite regulatory constraints, while U.S. exchanges are currently limited to Bitcoin, Hyperliquid has already moved far beyond crypto. Via the HIP-3 protocol, anyone can propose trading any asset, and many are already live. During peak trading in February, daily volume for silver hit $4 billion at one point, and oil trading volume briefly surpassed Bitcoin in April.
Two days before the CFTC approved the Hyperliquid exchange, Intercontinental Exchange (ICE, parent of the New York Stock Exchange) CEO Jeffrey Sprecher said at a Bernstein conference: "We're now talking about Hyperliquid, which if you haven't heard of it, is bigger than NASDAQ, okay?" Today, ICE is in talks with Hyperliquid, learning about their business model and asking regulators why traditional exchanges can't offer the same product. The direction of learning has flipped: Wall Street is studying a two-year-old, zero-venture-capital decentralized exchange because it has built the trading infrastructure the world's largest exchanges now want to replicate.
Perpetuals Will Eat Everything
I think this matters more than anything else because perpetuals are no longer just a crypto thing.
They started as a Bitcoin trading instrument, then expanded to all altcoins. Today, they've moved into commodities like gold, silver, oil, and gas. Then, they expanded to stocks like Nvidia and Tesla, to pre-IPO companies like SpaceX and OpenAI, and now include prediction markets via HIP-4.
In just two years, perpetuals have gone from a crypto hack to a financial instrument that can reference any asset in the world, trade 24/7, and have no expiration date or clearing intermediary. Traditional derivatives were designed for a world where markets closed at night and made sense in an era of physical exchange floors and paper-based settlement.
But in today's global digital infrastructure, where assets trade around the clock, session-based markets can create gaps. For instance, an oil trader looking to position ahead of a geopolitical event over the weekend has nowhere to go on any regulated exchange. On Hyperliquid, that trade is already possible. The CFTC acknowledges this. The agency's staff advisory on 24/7 trading explicitly states: "Derivatives on crypto assets may be particularly well-suited for 24/7 trading due to digital infrastructure and global reach."
Now the real competition is whether U.S.-regulated platforms can change quickly enough to make a difference. For example, the average fee for futures on centralized exchanges is about 4 basis points, while Hyperliquid's fee is just 2 basis points. The gap is even wider for spot trading: 15 basis points vs. 5 basis points. Since switching platforms takes minutes, traders will simply go where fees are lower.
Compass Point analysts gave Coinbase a sell rating the week the CFTC approved its derivatives listing, citing a wave of competition in derivatives markets that would erode its pricing power and squeeze margins. Coinbase's perpetuals revenue in Q1 2026 was $50 million, while retail trading revenue fell to its lowest level since Q3 2024. The perpetuals business, while growing, is also cannibalizing the more profitable spot trading market.
Indeed, this compression manifests in many ways. If you can get leveraged directional exposure to any asset anytime, anywhere, with no expiration date, then traditional derivatives seem trivial. For example, why roll over quarterly futures contracts when perpetuals offer continuous exposure? Granted, funding rates can exceed rollover costs during crowded trades, sometimes adding 2% every eight hours. Exchanges also have every incentive to keep quarterly contracts alive because rolling over means two extra trades and two rounds of extra fees. But most retail traders hold positions for hours or days. For them, a contract with no expiration is simply easier.
Why buy short-term options when perps can offer similar directional leverage? True, options have limited downside to the premium paid. But look at the actual volume. In 2025, average daily volume for 0-day-to-expire S&P 500 options was 2.3 million contracts, most of which were pure directional bets. For that use case, perps are simpler.
I'm not saying perpetuals will completely replace options or traditional futures, as options offer defined risk and convex payoffs that perps cannot replicate. However, for the vast majority of trading activity that is purely about directional leverage, perpetuals are the better, more economical option. Ultimately, the product has proven its success, with at least $90 trillion in annual volume as evidence.
