Perpetual futures grow beyond crypto

Welcome to Sherwood’s deep dive into futures markets, presented in partnership with

Perpetual futures trading, colloquially known as “perps,” is pouring into traditional finance, after starting primarily as a core component of the crypto industry. 

Until 2025, the instruments were largely inaccessible to US-based traders on regulated platforms, yet perpetuals have historically dominated crypto trading activity, a trend that’s only escalating. 

Last year, perps accounted for nearly 70% of bitcoin trading volume as traders across a number of different perpetual decentralized exchanges generated $7.7 trillion in volume in 2025, more than quadruple the $1.9 trillion generated over the prior four years combined, data from blockchain analytics firm Artemis shows. So far in 2026, perpetual volume for on-chain protocols has reached $1.6 trillion and is on pace to exceed last year’s record. 

Meanwhile, perpetual trading volume of the top 10 centralized platforms, including Binance, stood at $84.2 trillion in 2025, according to a February report from CoinGecko.

Now, perpetuals are bridging traditional and on-chain finance. US Commodity Futures and Trading Commission Chairman Mike Selig announced plans to get crypto perpetual futures into the US “within the next month or so,” CoinDesk recently reported. 

The news comes after US-based Cboe Global Markets and Coinbase Derivatives both announced last year new products that offer investors perpetual-style exposure to bitcoin and ethereum. 

Likewise, the derivatives arm of Singapore Exchange introduced trading for bitcoin and ether perpetual futures last year, while blockchain protocol Hyperliquid has enabled perpetual futures markets for contracts tracking stock market indexes, specific companies, and commodities such as precious metals and crude oil. 

The attraction of perpetuals is simple: they allow traders to take a leveraged directional view on an asset at any time of day without worrying about contract expirations. With 24/7 markets, an ongoing news cycle, and consistent geopolitical surprises, the flexibility to open or close a position with borrowed capital is appealing, especially when news breaks after the ringing of the closing bell. 

Perpetual vs. conventional futures contracts

Conventional futures contracts enable traders to buy or sell an asset at a predetermined price on a specified future date, the expiration. 

As such, exchanges must split liquidity across different maturity dates, while traders have to roll over their futures contracts if they wish to maintain exposure as expiration approaches. This means the trader must close out their contract before settlement and open a new one, incurring additional transaction costs and time.

On the other hand, perpetual futures have a central distinction: they don’t expire. This allows exchanges to concentrate liquidity into a single instrument, according to Sean Dawson, head of research at crypto options platform Derive.xyz. “A market maker doesn’t have to worry about basis risk across multiple expiries — it’s all aggregated into one number,” Dawson told Sherwood News. 

Traders also have a better user experience as they avoid the hassle of rollovers and don’t need to conduct the mental gymnastics of choosing different expiries for a single instrument. 

Elements of a perpetual futures contract

Funding rates

A perpetual futures contract is designed to track the underlying asset’s price, and to do this, venues use funding rates, or fees paid by one side of the contract to the opposite side. 

A positive funding rate means traders holding long positions in perpetual markets are paying a fee to those holding short positions, while a negative funding rate means those who have a short position are paying the other side to keep their position open.

When funding rates are elevated in one direction, the fees encourage traders to open a position on the other side, anchoring the perpetual to the underlying price and preventing the spread between the two from growing. On Hyperliquid, “the rate is calculated based on the difference between the contract’s price and the spot price of the underlying asset,” the protocol’s documentation explains. 

Leverage

Perpetual contracts enable investors to trade assets with leverage, such as the CL-USDC market on Hyperliquid, which tracks the value of one barrel of West Texas Intermediate Light Sweet Crude Oil, the global benchmark for oil prices. 

Assume the price of crude oil is trading at $100. By using perpetual swaps, investors can employ leverage up to 20x their outlay.  

Just as in traditional futures, leverage allows traders to multiply their gains, but the reverse is true as well, as we detailed here. The more one borrows, the higher the leverage, increasing both potential gains and losses. 

Margin

Margin refers to the required collateral traders commit to a venue in order to borrow funds and trade with leverage. 

Even though a trader’s initial margin is largely dependent on the amount of leverage they use, trading venues have different ways in determining how much collateral is required to open a trade. 

On Hyperliquid and Binance, the calculation is straightforward, where initial margin is equal to the position value divided by chosen leverage, though both platforms have margin tiers. For example, on Hyperliquid, a notional bitcoin position value exceeding $150 million can go only to 20x leverage, while one less than $150 million can go to 40x leverage. 

After the initial trade execution, traders should be cognizant of their maintenance margin, which refers to the minimum amount of collateral that must be maintained in an account to keep a leveraged position open. These vary per exchange.

Coinbase, for example, calculates maintenance margin as two-thirds of the initial margin.

Hyperliquid’s document states, “The maintenance margin is half of the initial margin at max leverage, which varies from 3-40x. In other words, the maintenance margin is between 1.25% (for 40x max leverage assets) and 16.7% (for 3x max leverage assets) depending on the asset.”

Trading venues may also allow traders to choose between cross and isolated margin modes when opening a position. Under cross margin, all available collateral in an account backs all open positions, while isolated margin refers to an asset’s collateral being constrained to the single instrument. 

Adding margin pushes the liquidation price further away from the entry price, decreasing the likelihood of a forced closure. The degree of this shift depends on how much additional collateral was posted and the venue’s maintenance margin methodology. Overall, margin determines how much volatility a trader can endure before losing their position. 

Risks

Perpetual futures concentrate leverage, and with it, the potential for rapid account wipeouts. 

Liquidations remain a top risk for traders. A common occurrence in highly leveraged markets, liquidations refer to the forced closure of a position, the result of a trader’s active position moving against them and their collateral falling below required levels to keep the perpetual contract open. With perpetual contracts, a trader can lose their entire collateral. 

One recent mass liquidation event occurred on October 10, when liquidations within the crypto industry climbed to an all-time high of nearly $19.2 billion, affecting more than 1.6 million traders, data from CoinGlass shows. 

Trading venues close a trader’s position to protect the exchange from additional losses and bad debt. On Hyperliquid, when a user’s position slides under its margin requirement, the protocol attempts to close the position entirely by sending market orders to its book. 

“The orders are for the full size of the position, and may be fully or partially closed,” the venue’s documentation states. “If the positions are entirely or partially closed such that the maintenance margin requirements are met, any remaining collateral remains with the trader.”

Traders should also be aware of counterparty risk. Crypto protocols allowing perpetual futures trading are often targets of malicious actors. Last year, hackers drained $42 million from a liquidity pool on decentralized perpetual exchange GMX. Smart contract exploits, which have halted trading on venues, remain a material risk for perpetual traders on blockchain rails.