Perpetual contracts are penetrating traditional mainstream assets.

Written by: Ryan Weeks

Translated by: Chopper, Foresight News

Last month at an event in the White House, Donald Trump praised financial regulators, referring to their "hard work" in pushing the Singapore-based online exchange Hyperliquid to enter the U.S. market. Trump has long positioned himself as "the pro-cryptocurrency president": he owns a digital currency named after himself, and his family has earned at least $1.2 billion in crypto-related profits. However, Hyperliquid is not an ordinary crypto project; it focuses on perpetual futures contracts, covering cryptocurrencies, crude oil, precious metals, and stocks of U.S. listed companies. Regardless of the merits, this type of product has the potential to reshape the investment approach to almost all asset categories.

Traditional futures contracts allow investors to buy and sell assets at a predetermined price and have an expiration date, serving both speculative purposes and hedging risk. For example, investors can buy gold futures to hedge against the depreciation risk of the dollar. Perpetual contracts, however, are altogether different; their derivatives first became popular in the crypto investment circle, have no expiration date, can be traded 24/7, and support high-leverage borrowing to amplify potential returns. Arthur Hayes, co-founder of the Seychelles-based crypto exchange BitMEX, known as the inventor of perpetual contracts, stated: "From purely the product itself, perpetual contracts are simply a better product."

While some traders have become wealthy through perpetual contracts, many more have incurred losses. A recent study by the hedge fund Event Horizon Labs indicates that less than a quarter of accounts on the Hyperliquid platform are profitable. Last year, the trading volume of perpetual contracts on crypto exchanges reached $62 trillion, more than three times the scale of the crypto spot market, with almost all trades occurring in offshore markets. The trading volume of Hyperliquid accounts for only a small portion of this, but the platform is rapidly expanding into traditional asset markets, especially precious metals, crude oil, and stocks.

Traders on Hyperliquid believe that compared to existing financial instruments, perpetual contracts can capture asset price movements more purely, as contract prices follow spot prices. Bloomberg Businessweek interviewed six traders from Hyperliquid, and for security reasons, most preferred to remain anonymous.

Earlier this year, under the chairmanship of Michael Selig, the U.S. Commodity Futures Trading Commission (CFTC) set accessibility criteria that allowed U.S. licensed platforms to offer perpetual contract trading. A spokesperson for the commission stated in an email: "The CFTC believes that on-chain finance is the next frontier in finance and hopes it can develop legally and compliantly in the U.S." Prediction market platform Kalshi and digital asset exchange Coinbase have already launched crypto perpetual contracts, marking the first time such products have entered the U.S. market. Naturally, Hyperliquid does not want to fall behind in this wave.

However, this series of actions has raised concerns among some institutions on Wall Street. After Trump made related statements in mid-August, the stock price of the world's largest traditional derivatives exchange, CME Group, fell by 3.4%. The CME subsequently sued the CFTC, claiming that Selig "circumvented the regulatory framework required to approve perpetual futures products." The CME alleged that regulators had not considered the significant real-world impacts that this brand new regulatory scheme could bring. The CFTC responded at the time by stating that the lawsuit was "without merit."

Of greatest concern is that perpetual contracts may lead to a disruptive change in trading patterns. The mechanism of perpetual contracts is complex, and even seasoned professional traders often run into pitfalls. About a year ago, several crypto exchanges experienced approximately $19 billion in liquidations of crypto perpetual contracts, badly hitting the entire crypto market, which has yet to fully recover. Due to a lack of regulation, perpetual contracts have long been a paradise for traders, who often trade anonymously. However, as perpetual contracts increasingly link to real-world assets, U.S. regulators are bound to strengthen oversight.

The perpetual contract market is likely to be divided into two: the already mature offshore market and the entirely new U.S. compliant market. The U.S. market will impose stricter regulations on traders and operators, similar to the developmental path of prediction markets. This process of differentiation has already begun. Kraken's parent company, Payward, announced on September 16 that it plans to open Hyperliquid perpetual contract trading to U.S. clients. For Hyperliquid and its competitors, the stakes in this game are extremely high.

Yesha Yadav, a professor at Vanderbilt University Law School whose research focuses on digital assets, stated: "If it reaches a high-profile moment in the U.S. but experiences a significant risk incident, it will create substantial obstacles to mainstreaming such assets and attracting Wall Street's participation."

On August 19, Selig and Trump attended a cryptocurrency event at the White House

Arthur Hayes is a typical representative of the crypto industry; he is robust, flamboyant, owns supercars, skis in Japan for several months, and receives stem cell infusions. His Substack column has a large number of loyal readers, covering topics such as meme coins and economic history. His past experiences are controversial, and he has connections with Trump. Last year, Trump pardoned BitMEX co-founders Arthur Hayes, Benjamin Delo, and Samuel Reed. The three pled guilty in 2022, admitting they had failed to establish risk control mechanisms to prevent illicit funds from entering the exchange.

In 2016, Hayes and his team designed perpetual contracts with no expiration date. The challenge at the time was how to ensure that a contract that never settled could continuously anchor to the underlying price. Perpetual contracts achieve this through continuous funding rate settlements between traders: when the price of the perpetual contract exceeds the spot price, long traders typically pay funding to short traders, increasing the cost of holding long positions, making shorts more attractive; when the contract price is below the spot price, the funding flow reverses. This two-sided check keeps the contract price closely aligned with the spot price. Hayes stated: "This core mechanism has not changed in ten years."

Traders using leveraged perpetual contracts can establish positions far exceeding their principal, amplifying both gains and losses. If market trends turn unfavorable, exchanges will automatically liquidate user positions at specific thresholds. In extreme market conditions, even profitable orders may be forcibly liquidated, known as automatic liquidation mechanism (ADL); this mechanism is triggered when the market experiences intense fluctuations and the exchange faces risks, ensuring platform stability. James Newman, managing partner at investment platform Republic, explained: "Automatic liquidation means that your profitable orders may be forcibly liquidated to compensate for someone else's losses."

Previously, traders mostly could only participate in the perpetual contract market on unregulated offshore platforms. To offer ultra-high leverage, a platform must ensure it can withstand extreme market fluctuations, thus giving rise to a shared loss mechanism. This is an inherent characteristic of perpetual trading, but it has not been fully understood by the public. Newman stated: "Traders frequently trade perpetual contracts, but their understanding of the product is severely lacking."

This system had allowed BitMEX to become the largest crypto derivatives platform globally for several consecutive years. However, the exchange later fell into legal disputes, ending its dominance in the industry, and is currently in the process of shutting down. Nevertheless, the wave of perpetual contracts has not stopped.

In October 2025, just days after Bitcoin broke through the historic high of $126,000, Trump suddenly threatened to impose a new round of tariffs on China, causing market risk appetite to shrink rapidly, and the crypto asset market took a sharp turn downward. Even experienced perpetual contract traders could not escape this impact. Former Royal Bank of Canada ETF trader Walter Li, now an independent investor, has invested heavily on Hyperliquid, stating: "The biggest risk is liquidation." During the crypto crash, several exchanges experienced severe delays, with some traders unable to supplement margin or keep track of market conditions in real-time. However, Hyperliquid maintained normal system operations during the massive wave of liquidations.

Hyperliquid was co-founded in 2023 by Jeff Yan, a former trader at the quantitative firm Hudson River Trading. The platform's shift to real-world assets began with the HIP-3 upgrade in October last year, which allowed third parties to launch contracts on the Hyperliquid infrastructure. A third-party platform named Trade.xyz seized this opportunity. Operated by a small and mostly anonymous team, it established the largest trading market on Hyperliquid by listing contracts for physical assets including stock indices, silver, oil, and stocks, with a trading volume exceeding $500 billion to date. In July of this year, the monthly trading volume of real asset perpetual contracts on Hyperliquid reached $115 billion, surpassing the platform's native cryptocurrency trading volume.

A spokesperson from Hyperliquid's policy center stated in an email that perpetual contracts are a complement to the traditional futures market rather than a replacement. "Once the U.S. regulatory pathways open, Americans will be able to enjoy the market services brought by on-chain infrastructure through U.S. licensed entities."

Investors are optimistic about this narrative. The Hyperliquid associated token HYPE once set a historical high of about $98, rising nearly fourfold this year and doubling in price since early August.

At the end of February, when the U.S.-Iran conflict broke out, the global mainstream oil market coincided with the weekend closure, but Hyperliquid continued trading. The oil perpetual contracts on Trade.xyz continued to trade, anticipating the direction of oil prices after the traditional market opened.

Tobias Reisner, a Hyperliquid trader and enthusiast based in Germany, stated: "Trump's policies create massive market fluctuations, and traders brought by the HIP-3 upgrade profit significantly from these fluctuations."

One of the core reasons Hyperliquid presents to regulators is that this system can provide price signals for major events during market closures, filling the gap of the traditional market. The Hyperliquid policy center previously submitted documents to U.S. SEC officials to use this argument to advocate for the exchange's entry into the U.S. Bloomberg's observations during the Iran War provided limited support for this logic.

The spokesperson stated that research from the Hyperliquid policy center found that in nearly 75% of traditional market closure cases over weekends, the weekend prices of oil perpetual contracts were closer to the prices when the traditional market reopened on Sundays than the Friday closing benchmark price.

Mainstream trading institutions have already begun to pay attention to this track. Flow Traders, headquartered in Amsterdam, trades real asset perpetual contracts on multiple platforms, including Hyperliquid. CEO Thomas Spitz wrote in an email: "Once these products become recognized price indicators among professional traders, more institutional funds will enter the market. Further regulatory clarity and improved infrastructure will become turning points for this type of market."

This is where the U.S. market comes into play. Kraken's parent company Payward plans to offer perpetual contracts based on Hyperliquid technology to U.S. customers, equating to providing a landing template: business is handled by Payward's CFTC-regulated exchange and clearing agency, while another Payward entity is responsible for user registration.

If this type of cooperative model is the plan for Hyperliquid to enter the U.S., new questions arise: Can the platform's original core appeal be retained? Some traders interviewed by Bloomberg Businessweek believe that product features will be significantly weakened. Reisner anticipates Hyperliquid will require U.S. users to complete identity verification (with current offshore platforms not needing KYC). Margin thresholds, leverage restrictions, and self-certification of investor qualifications are all unknowns. Hayes stated: "This is very difficult. If you want to enter the U.S. market, you have to sacrifice a lot of the core mechanisms that the offshore market relies on for success, which will reduce its competitiveness."

To some extent, Hyperliquid has already entered the U.S. Although the exchange is not officially open to U.S. traders, the Hyperliquid policy center claims that any enterprise can use its infrastructure to launch products in the U.S. Professor Yadav from Vanderbilt University stated that U.S. traders are accessing offshore platforms via VPN. More than a dozen experts interviewed by Bloomberg Businessweek reached a consensus that many traders are located in the U.S. Yadav said: "A significant portion of the liquidity comes from within the U.S."

In the past, this situation would have plunged the crypto exchange into serious legal crises. However, now it is more likely to become the underlying foundation for businesses about to be under more relaxed regulations.