Opinion
|8 min ReadPerp Swaps Push TradFi To Adapt Or Die
Jax Morales
Senior Analyst
Published
Jan 16, 2026
For most traders, a perp is just “the thing you use for 20x or 100x”. Hayes’ latest essay is a reminder that this contract was built as a survival tool for a tiny Hong Kong exchange and has evolved into a structural threat to listed futures, options, and the traditional clearinghouse model.
How One Odd Contract Became The Default
Back in 2016, BitMEX was a five person shop sitting behind OKCoin and Huobi, who controlled almost all crypto derivatives flow with Bitcoin quarterly futures. BitMEX split its small liquidity across daily, weekly, monthly, and quarterly contracts, making it impossible to compete on depth. The internal question was simple: is there a way to collapse everything into one product, with no expiry, so every trader hits the same orderbook.
That question produced the XBTUSD perpetual swap. The first version borrowed from Robert Shiller’s perpetual futures idea and Bitfinex’s peer-to-peer lending markets. Longs and shorts exchanged interest-like cash flows in Bitcoin and dollars, while margin and PnL stayed in Bitcoin. On paper it solved two problems at once: one contract instead of a strip, and a trading experience that felt like margin rather than clunky quarterly futures.
In practice, a raging bull market broke the design. Bitcoin was ripping double digits in a day, synthetic dollars were scarce, and the swap traded at a persistent premium to spot. If positions were marked to spot, longs needed huge extra margin to cover the gap. If they were marked to the swap, a fast snap back toward spot would leave longs insolvent and shorts unable to collect. Traders hated the confusion around the funding formula, support tickets exploded, and even inside BitMEX there were calls to scrap the product.
The turning point was the move to funding based on a premium index. Instead of reading external lending rates, BitMEX measured the average gap between the perp and spot over a window and used that as the next funding rate, capped as a fraction of maintenance margin. When the contract traded rich, future longs knew they would pay out, shorts were rewarded to lean into the premium, and the basis compressed. Funding could be dialed more aggressive or more gentle simply by adjusting how often it was charged.
Once that self-correcting loop was in place, the contract started to behave like a tight proxy for spot with leverage. BitMEX slowly removed the clutter of short dated futures and let liquidity pool in a single flagship perp per asset. Combined with an insurance fund and automatic deleveraging that treated winners and losers symmetrically, the exchange gradually overtook the Chinese incumbents and, by 2018, was the largest crypto platform by volume.
Why Retail Loves Perps And Regulators Do Not
Hayes frames perps as the perfect retail instrument because they solve for two scarce resources at once: leverage and liquidity. In most jurisdictions, ordinary traders cannot touch listed derivatives with serious leverage. They end up in contracts for difference or ultra short dated options, taking nonlinear payoffs or direct counterparty risk to a bucket shop.
Perps offer a linear payoff on a transparent orderbook. The client knows that their worst case loss is the collateral posted on exchange. The operator knows that it can only rely on that posted margin, because crypto is bearer and courts cannot claw coins back from chain addresses. The natural answer is early liquidation, a large insurance fund and, when those are not enough, socialized loss and automatic deleveraging that sometimes clip profitable positions so that losers can be paid.
Traditional clearinghouses live in a different world. They promise guaranteed settlement, rely on courts to chase bankrupt clients and, as Hayes notes, sit on thin capitalization compared to the size of global derivatives books. Plug Bitcoin volatility and 50x leverage into that structure and you have real systemic risk. The easiest fix is simply to keep leverage low and margin fat, which is exactly what CME style venues do on anything volatile.
That clash of models is why BitMEX’s US push failed. Hayes describes detailed meetings with the CFTC where he walked through funding, insurance funds and socialized loss as a way to protect both traders and the exchange. The regulator declined to even accept an application. Years later, enforcement actions landed instead. The message was that the agency existed to defend the current clearing architecture, not to let an offshore crypto scheme rewrite it.
A parallel attempt came with FTX. Sam Bankman-Fried built his exchange on perps, then tried the classic Washington route by spraying campaign donations and cultivating ties with senior Democrats and regulators. For a while, he was photographed sitting next to powerful committee chairs and CFTC commissioners while lobbying for direct clearing of margined crypto products.
When FTX and Alameda imploded, the political mood flipped from cautious engagement to open hostility. Lawmakers who had embraced SBF swung hard in the other direction, and regulators used that cover to crack down on US-facing crypto businesses.
The politics around Trump’s return shifted that again. After being debanked and attacked in court, the Trump family started to treat Bitcoin and stablecoins as a practical hedge, not a punchline. Crypto became a rich, motivated donor bloc. Backing friendlier rules for exchanges, stablecoins and derivatives turned into both smart politics and personal revenge on the banks that had cut them off.
For regulators outside America, this creates permission rather than a revolution. It is always safer to align with the empire’s stance than to innovate alone. As soon as Washington tone softened, SGX in Singapore moved to list crypto perps, CBOE prepared perpetual style futures, and big US platforms began to trial constrained versions that fit within existing licenses.
Hayes’ point is that this is not born out of ideological love for crypto. It is a pragmatic adaptation to a product that already dominates retail leverage in one asset class and is now creeping into others.
Equity Perps And The Coming Fight Over Price Discovery
The most obvious next front is not Bitcoin at all, it is stocks. Hyperliquid’s HIP-3 framework already supports a Nasdaq 100 perp that trades more than one hundred million dollars a day. Other DEXs and CEXs are rushing to launch similar contracts on big US indices and single names. None of this needs tokenized shares. It only needs a reliable reference index and market makers willing to hedge basis against traditional venues.
For a trader in Seoul, Mumbai or São Paulo, the value proposition is clear. They can already punt BTC and ETH with high leverage on a phone, twenty four hours a day. Giving them the same experience on NVDA, QQQ or the S&P 500 is a natural next step. For institutions, equity perps offer a way to hedge or express views on political, military or regulatory headlines that drop after New York closes, when Globex liquidity is thin or unavailable.
Hayes argues that if this path continues, price discovery for the largest US tech names and indices will gradually migrate to these 24/7 perp markets. Traditional futures will not disappear, but they will become followers. Financial television will start quoting the “crypto” S&P perp first and the CME contract second, simply because that is where the marginal trade is happening at more hours of the week.
Behind equities sits an even bigger prize: interest rates. Today the most traded derivatives contract on earth is CME SOFR. On chain protocols like Pendle are already building ways for users to separate and trade pure yield. If someone wraps that kind of fixed income exposure in a perp like interface that is intuitive to global retail, the same logic that made XBTUSD the default crypto instrument will begin to nibble at the edges of rates markets.
The wealth map around perps is already a strong signal. Binance’s rise from zero to the top of the exchange stack tracked the moment it took over perp volume from BitMEX. SBF reached paper billionaire status almost entirely on the back of perp trading fees before blowing up. Hyperliquid’s founder is now riding the first DEX that can credibly challenge CEXs on speed and leverage.
Hayes’ conclusion is blunt. The perp swap is not an exotic crypto gimmick. It is a cleaner way to concentrate liquidity, deliver leverage and match the reality of 24/7 markets. If legacy exchanges and clearinghouses want to stay central to how equities and rates are traded, they will have to adapt their margin and product design around this reality. If they refuse, the flow will not wait. It will route itself to the venues that already learned to live with socialized loss, insurance funds and a contract that never expires.
Disclaimer: This document is intended for informational and entertainment purposes only. The views expressed in this document are not, and should not be taken as, investment advice or recommendations. Recipients should do their own due diligence, taking into account their specific financial circumstances, investment objectives and risk tolerance, which are not considered here, before investing. This document is not an offer, or the solicitation of an offer, to buy or sell any of the assets mentioned.