Perpetual contracts have long been one of the main mechanisms through which the market seeks a fair price for bitcoin, ether, and other crypto assets. When the same instruments were applied to the private company SpaceX ahead of its IPO, traders came closer to the real assessment of demand than Wall Street.
If you ask how the price of a cryptocurrency is formed, many will recall the spot market: the buyer meets the seller on the exchange, and the last trade becomes the current price. For bitcoin, ether, and a significant part of the crypto market, this picture has been too simplified for several years now.
In practice, perpetual futures, or perps, increasingly play a key role. These are leveraged contracts with no expiration date: the trader does not buy the asset directly but opens a long or short position on its price. To hold such a position, they provide collateral, monitor margin, and regularly pay or receive funding. If the price moves sharply against the position and the collateral is insufficient, the exchange may forcibly close the trade.
Estimates suggest that perps account for about 93% of the total crypto futures volume, and daily turnover on them regularly exceeds spot trading volumes for the same assets.
A standard future always has a settlement date. At this point, its price is forced to converge with the spot price of the instrument it tracks. This instrument is called the underlying asset. A perpetual contract has no such date: the position can be held as long as desired, but for this, you have to pay or receive funding—a variable rate recalculated throughout the day.
How Perps Differ From Standard Futures
- Standard future: it has an expiration date, after which the contract is closed through delivery of the asset or cash settlement.
- Perpetual future: there is no expiration date, so the contract is maintained through margin and the funding mechanism.
- Settlement mechanism: for a standard future, the price converges with spot by the settlement date; for a perp, this convergence is maintained by the funding rate.
- Liquidation: in both cases, a leveraged position can be forcibly closed if the collateral becomes too small; with perps, this risk is especially noticeable because the position can remain open for a long time and constantly reacts to price movements.
What Other Types of Derivative Contracts Exist
- Classic futures: a contract to buy or sell an asset in the future under predetermined conditions.
- Options: a contract that gives the right to buy or sell an asset at a specific price but does not require you to do so.
- Swaps: an agreement to exchange cash flows or price differences between the parties to the transaction.
What Are Inverse Perpetual Contracts
An inverse perpetual contract is structured so that collateral and settlements are in the base cryptocurrency, such as BTC, while the position value is usually pegged to the dollar price of the asset. In a regular linear perp, settlement is more often in a stable currency or stablecoin, so profit and loss are easier to calculate in dollars.
- Main difference: in an inverse contract, the result of the position depends not only on the price direction but also on which cryptocurrency is used as collateral.
- Typical scenario: a BTC holder can use an inverse perp to hedge the dollar price of bitcoin without selling the BTC itself.
Why Price Increasingly Originates in the Derivatives Market
Researchers of market microstructure have repeatedly tried to understand where exactly bitcoin first incorporates new information. In other words, which venue sets the impulse and which markets follow the movement. In many studies, the answer shifts toward derivatives.
Carol Alexander and co-authors, in a study for the Journal of Financial Markets, concluded that perpetual swaps on unregulated venues were the strongest source of price discovery for bitcoin. Regulated futures and U.S. spot exchanges more often reacted to already started movements than initiated them.
Another study identified Binance’s perpetual market as the main price formation center in the fragmented crypto market. There is no absolute clarity here: some research shows that spot can outpace derivatives at certain frequencies or during stress episodes. But the general trend of recent years is clear: more and more signals come from the derivatives market.
Historically, we have seen that perpetual futures more often lead the price during rallies in a bear market. For example, the increase in demand for bitcoin perpetual futures preceded the moves of January 2026 and April–May 2026, said Julio Moreno, head of research at CryptoQuant.
According to him, during such periods, spot demand decreased, while interest in perpetual contracts, on the contrary, increased. Therefore, it was the perp market that led the price up, even though spot demand was declining at the time.
How the Funding Rate Keeps Perps Close to Spot
The main question is why a perpetual contract should stay near the price of the underlying asset at all if it has no expiration date. The answer is the funding rate. Every few hours, the more crowded side of the trade pays the other side.
If the perp trades above spot, traders in long positions—that is, those betting on growth—pay participants with short positions. This makes holding longs more expensive and gradually brings the contract closer to the price of the underlying asset. If the situation is reversed, shorts pay. A simple example: with a $10,000 position and a funding rate of 0.01%, the payment for one period will be $1. For a single trade, the amount seems small, but with high leverage and a long-held position, such payments quickly start to affect the result.
Therefore, the funding rate simultaneously acts as an anchor, a sentiment indicator, and a real expense item. For some participants, it is almost as important as the price itself: margin trading amplifies both profits and losses, and constant payments can significantly change the final result of a position.
Why Traders Use Perps
- Speculation: a trader opens a long or short to profit from price movement without buying the asset itself.
- Hedging: an asset holder can open an opposite position and partially protect against a price drop.
- Arbitrage: market participants use the difference between spot, futures, and the funding rate when prices diverge too much.
We surveyed more than 100 of our traders. Those who really use the platform for confident positions want to see predictability, not yet another indicator that needs to be interpreted separately, said Hon Yea, co-founder of the Grvt trading platform.
If you hold a directional position for several weeks, funding tells you nothing fundamentally new about the market. It simply eats into profit and loss while you wait for your scenario to play out. That is exactly how users describe it to us, not as a signal of what the market thinks, he added.
SpaceX Became a Real-Time Test for Perps
Such a market does not necessarily need a spot. In May and June, one of the world’s most prominent markets was a company that had not yet sold shares to public investors. We are talking about Elon Musk’s SpaceX, and the trading around it was built on crypto infrastructure.
SpaceX valued its record IPO at $75 billion at a price of $135 per share and began trading on Nasdaq on June 12. But long before that, traders on Binance, Coinbase, Hyperliquid, and other venues were already buying and selling pre-IPO perpetual contracts. These instruments were designed to reflect the presumed valuation of the company, not the actual share price.
Hyperliquid was the first: on May 18, the onchain derivatives exchange launched a synthetic perpetual contract on SpaceX. Binance opened its SpaceX market on May 21, and Coinbase joined on June 4. Later, similar contracts appeared on BitMEX, Bitget, and OKX.
Where Perps Are Usually Traded
- Popular venues: Binance, Coinbase, Hyperliquid, BitMEX, Bitget, and OKX—in this case, they acted as markets or infrastructure for such contracts.
- Basic steps: choose a venue, fund your account with collateral, select a contract, set leverage and position size, then monitor margin, funding rate, and liquidation risk.
The most interesting thing happened at the moment when the market’s accuracy could be tested. On the eve of the listing, perps on Hyperliquid and Binance were trading at about $170 per share. This was noticeably above the IPO price of $135 set by the underwriters.
The next day, SPCX shares opened, rose above $176 during the session, and closed the first day at $161, up 19%. The final price was almost exactly where the perpetual contract market had seen it in advance. Retail traders with an appetite for leverage assessed first-day demand more accurately than the banks that had been preparing the IPO price for months.
The main opportunity for a trade was precisely in the difference between the IPO price and the perp price. The perpetual contract market valued SpaceX significantly higher than $135, so traders could buy the contract before listing and bet on the convergence of quotes.
The mechanics were simple: each such contract was supposed to automatically switch to the actual SpaceX share price after trading began. Thus, the gap between the pre-listing perp price and the real opening price closed itself. Given that the IPO was oversubscribed by about four times, the trade direction seemed fairly obvious to many, and the window of opportunity existed only until the listing.
Where Perps Got It Wrong: Demand Is More Visible Than Supply
Then the market faced what it had predicted but could not fully account for. After the June peak, SPCX lost more than 40%, dropping from the listing price of $135 to about $115 at the time of publication.
The reason was not demand but supply. Only a small portion of SpaceX shares was offered in the IPO. Starting around August 6, about 900 million locked internal shares are expected to become available for sale. Such a factor cannot be assessed by perps as cleanly as the hype-driven demand before trading begins.
Main Risks of Trading Perpetual Futures
- Leverage accelerates not only profits but also losses.
- If margin is insufficient, the position can be forcibly liquidated.
- The funding rate can gradually eat into the trade result.
- Sharp price movements and weak liquidity can lead to execution worse than the expected level.
- Perps sense demand well but are worse at accounting for future supply overhang and sale restrictions.
This episode clearly shows the strong and weak sides of perpetual markets.
- Advantages of perpetual futures: they quickly capture sentiment and buying interest, provide access to leverage, and allow for rapid adjustment of market risk.
- Disadvantages of perpetual futures: they are worse at seeing future supply overhang, sale restrictions, and corporate details that are important for any company.
In this sense, a SpaceX share is not just a ticker on the exchange. It is also an asset on the balance sheet, tied to ownership rights, restrictions, and future sales; its value can affect the balance sheet of owners and investors. Cryptocurrency is structured differently, but the market logic is similar: price often originates where risk is more active and turnover is higher.
The SpaceX case in extreme form confirmed what is already visible in regular bitcoin and ether trading: derivatives increasingly set the direction, and the spot market adjusts afterward. The strong side of perps is quickly sensing demand; the weak side is almost complete blindness to future supply. This is worth remembering every time a bitcoin rally or sharp sell-off first appears in the funding rate and only then reaches spot.
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