For years, crypto’s most-used financial derivative was one that American investors technically couldn’t access while complying with the law. That changed on May 29, when the Commodity Futures Trading Commission (CFTC), the federal derivatives regulator, cleared the first onshore Bitcoin (BTC +0.11%) perpetual futures contract.
Now, all sorts of different platforms are going to start offering perpetuals to their users. The prediction market Kalshi switched on Bitcoin perpetuals in early June, and Polymarket is preparing a rival product.
But something can be legal and popular without being suitable for everyone. So before you try dabbling in perpetual futures, let’s learn how “perps” work and why there’s more than one way they can make money for a savvy investor.
Image source: Getty Images.
What a perpetual future actually is
Picture a plain futures contract that expires; it’s a deal to buy or sell something at a set price on a set date. Perpetuals delete the date, so a position can run indefinitely as long as you keep collateral posted, and they also allow leverage.
The idea predates crypto. The illustrious economist Robert Shiller floated it in the early 1990s as a tool for hard-to-price assets like houses, and the BitMEX crypto exchange started offering them for Bitcoin in 2016. Perps are now offered for everything from crypto and stocks to oil, silver, and even chip prices.
Today’s Change
(0.11%) $70.07
Current Price
$63417.00
Key Data Points
Market Cap
$1.3T
Day’s Range
$62805.00 – $64285.00
52wk Range
$59227.73 – $126079.89
Volume
28.6B
Many traders have had a lot of fun trading crypto perpetuals on international exchanges, and on-chain versions took off in late 2024. The catch is that using leverage with perps lets people borrow up to 100 times their initial stake, so a 1% move in the underlying asset can trigger liquidation, wherein the platform seizes the collateral. In one recent 24-hour window, more than 254,000 positions were wiped out according to analysis by crypto data site Coinglass; the more volatile the underlying asset, the riskier the position.
Against the professional companies across the table, most individuals have no edge in the perps market and little in the way of risk management practices. So for almost all people, dabbling in Bitcoin perps, or any other kind, is most likely a losing proposition, even if they’re cool and newly legal.
Own the casino; don’t play in it
Even if you don’t compete in perps directly, there’s still a way to get some upside: Owning a platform that collects fees on the volume of contracts being traded.
Hyperliquid (HYPE +1.71%) is the most straightforward example here, as it holds around 70% of the on-chain market for decentralized perps and also routes 99% of its platform’s trading fees into buying back its own token, thereby tying platform usage directly to token value.
Today’s Change
(1.71%) $1.00
Current Price
$59.71
Key Data Points
Market Cap
$13B
Day’s Range
$56.95 – $62.27
52wk Range
$20.52 – $75.46
Volume
857.5M
But that 70% covers only the decentralized on-chain niche; across the far larger global market for perpetuals, offshore centralized crypto exchanges are still far larger, and fresh entrants are flocking in by the week.
So just appreciate that this isn’t a safe asset; it’s a high-risk play that’s only right when it’s inside a carefully diversified crypto portfolio.