Perps are going pro

Like bitcoin and prediction markets, perps are another fad that began on the fringes of degeneracy and are now hurtling toward mainstream finance.

Perpetual futures, aka “perps,” may have a strange name, but their actual use is even wilder: These are specialized derivatives that enable traders to speculate on the price movement of an asset without actually owning it—hence the “future” part of the name. But unlike regular futures contracts, they never expire—there’s the “perpetual” part. For example, if you purchase a December oil future contract, it settles in December. With perps, the position never expires.

These instruments are essentially a retail trader’s dream and any sane investor’s worst nightmare: The retail crowd can speculate as far into the future as they want, amplify their returns (and losses) with leverage, and do this around the clock, 24/7.

If you can’t beat ’em…

The hub where these debaucherous little demons really took off is called Hyperliquid, an offshore crypto-based decentralized exchange. There, investors buy and sell perps directly on blockchain infrastructure instead of centralized exchanges. But now, perps are evolving from a weird thing your Dogecoin-loving cousin told you about, into a legitimate financial instrument.

In May, the CFTC reversed its earlier skepticism towards perps, and recently approved bitcoin perps for Kalshi and Coinbase. Coinbase in particular is jumping on the perp train, having recently rolled out US crypto perpetual futures, thematic index perps, stock perpetual futures, and even pre-IPO perpetual contracts that give exposure to companies like SpaceX.

TradFi is hopping on the nonstop trading bandwagon, too. The reason is simple: Why would traders settle for a 4pm deadline when they can trade 24/7 elsewhere? Nasdaq has partnered with Kraken to tokenize stocks to trade around the clock, while the New York Stock Exchange, CME Group, and Cboe Global Markets are also tinkering with some form of around the clock trading.

But it’s not all smooth sailing into a perpetual-futures future: While the CFTC is fine with Kalshi rolling out perps to its users, CME Group is suing the regulator to stop it. CME is the largest futures exchange in the country, so it’s trying to defend its turf from new competition, not necessarily protect investors.

TLDR: It goes without saying that nobody needs to be using these things, and in fact, you probably shouldn’t be. But as perps creep into financial markets and investing lingo, you might not be able to avoid them forever.—LB