The crypto bull market of 2025 may have arrived, but the way its engine roars is vastly different from the past. If you are still fixated on spot trading volume to gauge market heat, you may only be seeing the tip of the iceberg. The true protagonist of this bull market is perpetual contracts, or Perps—a massive, highly leveraged PVP arena driven by fierce competition between bulls and bears. The liquidity, narratives, and wealth effects here are defining the entire market in unprecedented ways.

Why is liquidity unprecedentedly concentrated in the contract market? We will reveal through a numerical case how "short liquidations" become rocket fuel, driving asset prices to spiral upward.

Disclaimer: All made up; any resemblance is purely coincidental.

Entertainment Statement: Just for fun, don’t take it too seriously.

Contrarian Statement: If you think I’m wrong, then you are right.

1. Data Insight: When the "Tail" Starts Wagging the "Dog"

Phenomena are the best proof of theory. We first verify an astonishing fact through data: the trading volume of perpetual contracts has completely crushed the spot market.

• Trading Volume Comparison: According to data platforms like TokenInsight, in the second quarter of 2025, the trading volume of crypto derivatives (mainly perpetual contracts) on mainstream exchanges is typically 10 to 15 times that of spot trading volume. This means that when the spot market has a trading volume of $10 billion, the contract market's trading volume may have reached $100 billion to $150 billion.

• Open Interest: Observing the open interest of mainstream cryptocurrencies like BTC and ETH, as well as popular new coins, we can see that their scale far exceeds the corresponding spot inventory on exchanges. This indicates that the vast majority of market participants' risk exposure and capital are deployed in the derivatives side.

• Funding Rate: For most of this bull market, the funding rate has remained high and positive for an extended period. This has attracted a large number of "arbitrageurs" who enter the market to earn stable funding rates through the strategy of "shorting perpetual contracts + buying an equivalent amount of spot," further draining liquidity from the spot market and locking it into hedged positions.

Conclusion: The data clearly indicates that the market's capital, attention, and focus of competition have undergone a structural shift. Perpetual contracts are no longer an appendage to the spot market; instead, they have become the core battleground that dominates short-term price fluctuations. The market has shifted from "spot driving contracts" to "contract competition forcing spot."

“At this moment, spot has surprisingly become an ‘appendage.’”

2. Core Mechanism Revealed: How is the "Short Liquidation Rocket" Launched?

The "strange phenomenon" in the market—price increases do not start with spot buying but are driven by liquidations on the contract side. This is the core mechanism of the current "Perps bull market."

Let’s explain this process with a simplified numerical case.

Case: New Coin "RocketCoin" (RKT)

• Background Setting:

• RKT is a popular new project with an extremely low initial circulation of only 1 million coins (1/10) in the market. (Assuming total circulation is 10 million coins)

• The exchange has launched a USDT-based perpetual contract for RKT.

• Current spot price: $10.

• Due to the consensus that "new coins should be shorted," the contract market has accumulated a large number of short positions. Assume there are $10 million worth of short orders (300,000 RKT) waiting to be liquidated between $11 and $15.

Launch Process:

1. Initial Ignition: A whale or project party invests a small amount of money in the spot market, for example, buying 20,000 RKT for $200,000, forcibly pushing the spot price from $10 to $11. The spot market has low circulation (shallow market), making the lifting cost extremely low.

2. First Stage Rocket Separation (First Round Liquidation): When the RKT price hits $11, the first batch of short positions set to stop-loss at this price is forcibly liquidated (i.e., liquidated). Assume this batch of positions is worth $1 million.

• Liquidation Mechanism: The operation of "closing short positions" is "buying." The liquidation engine needs to immediately buy $1 million worth of RKT contracts in the market.

• Market Maker Hedging: Market makers providing liquidity to the liquidation engine sell contracts while immediately buying an equivalent amount of RKT spot in the market to hedge against their naked short risk.

• Price Feedback: This spot buy order from market makers further pushes up the already thin spot price, for example, from $11 to $12.

1. Second Stage Rocket Ignition (Chain Liquidation): When the spot price reaches $12, a new batch of larger short positions is triggered for liquidation. This process perfectly repeats the second step: contract liquidation -> market makers buy spot to hedge -> spot price further rises.

2. Entering Orbit: This cycle continues, forming a positive liquidation spiral. Each layer of short liquidation becomes fuel for the next round of price increases, pushing RKT's price from $11 all the way to $15 or even higher. In this process, the initial $200,000 "ignition" capital has leveraged passive buying of millions or even tens of millions of dollars.

Conclusion: This is the essence of the simple version of the "Perps bull market": using extremely low spot liquidity as a leverage pivot, creating counterparty positions (large shorts) in the contract market, and ultimately using the "liquidation mechanism" as the engine to drive prices to seemingly "rise out of thin air." The rise in spot prices is more like the result and manifestation of this process rather than the cause. (Clearly, in practice, it is not such a smooth operation.)

3. Why "This Version"? Timing, Location, and People

This phenomenon was not as obvious in previous cycles and is the result of multiple factors working together:

1. Timing (Project Party Strategy): Projects in this cycle generally adopt a "Low float, High FDV" issuance model. This creates a perfect "necessary and sufficient condition" for artificially controlling the spot market and leveraging the high-leverage contract market.

2. Location (Market Infrastructure): Perpetual contract products have matured significantly after years of development. A smooth trading experience, deep liquidity, and a well-established API and market maker system allow it to accommodate massive capital and complex competition.

3. People (Market Consensus and Narrative):

• The "Short New Coin" Paradigm: This rendered "consensus" actively creates a large amount of "fuel" for the market.

• Get-Rich Myth: The promotion of contract experts achieving hundreds of times returns continues to attract players seeking high-risk, high-reward opportunities. Especially the extreme trading operations of various whales on Hyperliquid provide ample imagination space for this "get-rich (negative)" narrative.

• The Temptation of Mechanisms: Funding rate arbitrage, liquidation sniping, and other complex plays have transformed the market from a simple long-short duel into a multi-role, multi-dimensional financial game, further locking in liquidity.

Conclusion

Everyone, don’t take it seriously; this round is merely a "Perps bull market," a playful term for the deep structural changes in the market. While it signifies a story of wealth growth, it more so narrates a complex financial fable about leverage, liquidity, mechanisms, and the competition of human nature, rather than simple value discovery.

In this version, spot has become the hedging instrument and the ultimate embodiment of price, while perpetual contracts are the core vehicle that integrates narrative, capital, and mechanisms, truly defining the pulse of the market. Understanding and adapting to this game rule of "using your liquidation as fuel" is key to navigating this cycle.

Finance, or rather competition, is just like this; PVP will always bring new experiences.

May we always hold a heart of reverence for the market.

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