Perps now anchor crypto, for better or worse

Perpetual futures, or “perps,” now sit at the crypto market’s center of gravity. These are derivative contracts with no expiry date — unlike traditional futures, they never settle, instead using a funding rate mechanism to keep prices in line with spot markets. In essence, perps let traders hold leveraged positions indefinitely, turning speculation into a 24/7 feedback loop that never closes.

Just a few years ago, spot markets, where traders bought and sold real bitcoin or ether, set the pace. Today, most of the volume flows through derivatives, especially perps, which now account for nearly 70% of Bitcoin’s (BTC) trading volume.

That is both a breakthrough and a fault line. By combining liquidity, leverage, and constant price discovery, perps made crypto markets deeper and more efficient — a true structural upgrade. Yet that same design also links every position, trader, and venue in real time, making the system more exposed to cascading risk.

So, the rise of perps is crypto’s defining innovation — the mechanism that turned digital assets into a continuously traded global market. But has that same innovation also made the system more fragile? Let’s find out.

The 24/7 market that never expires

Perps have reshaped crypto’s market structure, replacing fixed-hour trading with 24/7 liquidity, and changing how risk moves through the system. With expiry dates gone now and exposures being updated in real time, risk never stands still. This keeps order books deep and helps markets absorb shocks faster, at least under normal conditions. When volatility spikes, that same speed can transmit stress just as quickly, which is why the system sometimes amplifies, rather than dampens, sharp moves.

Unified collateral came next, meaning traders can now use a single pool of margin to support multiple positions across products or exchanges, instead of locking up funds separately. This turned perps from a trading tool into market infrastructure, because that shared collateral base now connects liquidity and leverage across the entire system.

So what does that mean in practice? Markets that once needed days to react now adjust in minutes. Liquidity is continuous, capital flows more freely, and price discovery happens at record speed. By linking previously separate markets, perps have changed how liquidity and pricing interact day to day.

But despite all these advantages, this new architecture has rewired relationships beneath the surface, creating interdependencies that only reveal themselves when liquidity suddenly moves the other way.

Liquidity cuts both ways

When most of the market’s risk runs through a single leveraged instrument — in this case, perpetual futures themselves — the same liquidity that cushions everyday shocks can amplify them in a crisis. Perps make it easy to hedge and move capital, but they also make it just as easy for crowded trades to unwind fast, which means that large groups of traders rush to close positions at once, triggering sharp and sudden price moves.

We’ve seen it again and again, when a sudden move in perps launches a chain of liquidations that impacts spot prices as traders try hard to keep markets aligned. You can even see it happen in real time — on Glassnode’s “liquidation heatmap,” clusters of over-leveraged positions glow like warning lights. When price breaks those levels, forced selling (or buying) surges across multiple exchanges, and volatility spikes within seconds.

I watched this firsthand on October 10, 2025, when a $19 billion wipe-out unfolded, being the largest single-day liquidation in crypto since FTX’s collapse. During that sell-off, Bitcoin – Tether (USDT) perpetuals on Binance traded almost 5% below the BTC/USD spot index — a real-time picture of how feedback between futures and spot can spiral quickly. Coinglass data also showed funding rates plunging to three-year lows as shorts accumulated, clearly demonstrating that stress had hit the very system meant to keep prices stable.

I think the lesson is learned: the same tools that made crypto efficient also made it more tightly linked, and sometimes, more brittle. Efficiency and depth are real, but so is the sensitivity that comes with them. When liquidity turns, everything moves at once, and the difference between “resilient” and “fragile” can be measured in seconds.

That’s the reality the market has to live with. Still, the question remains — can we close these gaps and make the system more resilient? That’s where the next evolution has to happen.

Perps 2.0: The next phase of risk control in crypto

Perps have pushed crypto to evolve fast by hard-wiring leverage, liquidity, and automation into the system — turning exchanges into real-time risk engines rather than just trading platforms. The next leap, though, is about resilience: making sure speed and efficiency don’t come at the cost of stability. Crucially, exchanges and trading desks already see the gap, and work is underway to mend it.

Some platforms, like Bybit or Bitget, are building smarter safety nets. Bybit has deployed tiered margins and adjustable leverage that automatically tighten risk when liquidity thins out. In turn, Bitget relies on deep insurance funds and partial liquidations to absorb shocks that, just a few years ago, would’ve erased whole segments of the market. Yet the finish line is still ahead.

Big shocks, like the recent $19 billion wipe-out, can still push even well-built systems to the edge. True resilience, in my view, means going further: cross-venue risk monitors that flag danger everywhere at once, adaptive funding rates, fees that rise automatically as leverage builds, discouraging traders from taking on excessive risk, and insurance pools that are transparent, auditable, and sized to match real market exposure. Only then will traders know how much stands between them and a full-scale cascade.

All this shows one thing: perps are flexible, modern, and central to crypto’s liquidity engine. But the next test is whether that engine can stay powerful and safe for anyone who joins the market.

So, the way forward is clear — make risk management a built-in feature, not an afterthought. Perps are here to stay, which means risk management has to be part of the system’s design itself. It should live in every trade, on every venue, in every moment. That’s what will decide whether perps become crypto’s foundation or its undoing.