Hayes: Wall Street’s Shift Toward Perpetual Derivatives Marks the Biggest Turn in Trading Since 2016
- Why Are Perpetual Contracts Disrupting Wall Street?
- BitMEX’s Rocky Road to Perpetual Dominance
- How Perps Outperform Traditional Derivatives
- The Future: Global Perps and Stock Derivatives
- FAQs: Perpetual Contracts Explained
The derivatives market is undergoing a seismic shift as perpetual contracts (Perps) gain traction, challenging traditional futures and options. Arthur Hayes, co-founder of BitMEX, argues that Perps—products with no expiry date, 24/7 trading, and DEEP liquidity—are reshaping Wall Street’s approach to risk and leverage. From Singapore’s SGX to the U.S.’s CBOE, exchanges are racing to adopt Perps by 2025, with Coinbase already listing them for retail traders. Meanwhile, Hyperliquid’s Nasdaq-100 Perp is hitting $100M+ daily volume. Hayes predicts Perps will dominate derivatives trading, especially as retail investors crave leverage and institutions seek crisis hedging tools. But the road hasn’t been smooth: BitMEX’s early struggles with liquidity and trader confusion highlight the challenges of innovating in this space.
Why Are Perpetual Contracts Disrupting Wall Street?
Perpetual contracts (Perps) are flipping the script on derivatives trading. Unlike futures or options, which expire, Perps let traders hold positions indefinitely—with funding rates balancing long/short demand. Hayes calls this "adapt or die" for Wall Street. The appeal? Simplicity. No rolling contracts, no expiry headaches. Just pure price exposure with extreme leverage (up to 100x in crypto). Traditional markets are catching on: SGX and CBOE plan Perp launches by 2025, while Coinbase added them earlier this year. Even the CFTC is warming up, proposing sandboxes for innovators to challenge giants like CME. "Perps solve two Core needs: leverage and liquidity," says Hayes. Retail traders, starved for leverage in equities, are flocking to Perps instead of CFDs or short-dated options.
BitMEX’s Rocky Road to Perpetual Dominance
BitMEX’s 2016 Perp launch was anything but smooth. With just five employees (Hayes, Delo, Reed, Dwyer, and Shao), they faced 95% market share by OKCoin and Huobi. Their 100x Leveraged Bitcoin Quarterly Future had thin liquidity. "We needed a product that felt like margin trading—no expiry, no basis questions," Hayes recalls. The team scrapped daily/monthly futures, kept quarterlies, and introduced XBTUSD Perps. Chaos ensued. Traders bombarded support, confused by funding rates. Bitcoin’s volatility made things worse: when BTC surged 10–25% daily, Perps traded at massive premiums (e.g., $1,000 Perp vs. $500 spot). Hayes fixed it with a "lookback index," converting past premiums into funding payments. By October 2016, volumes exploded—proof Perps worked, but only after brutal teething pains.
How Perps Outperform Traditional Derivatives
Perps offer unique advantages. For retail traders: 1)—100x in crypto vs. 2–5x in equities; 2)—deep pools like BitMEX’s $100M+ daily volumes. For institutions: 1)—PPPs (Perpetual Political Puts) now trade offshore for weekend risk; 2)—no gamma risk like options. Hayes notes a 10% bitcoin move with 100x leverage yields 10x returns vs. ~3x for monthly options. Even Nasdaq-100 Perps (via Hyperliquid’s HIP-3 protocol) are gaining traction. "Traditional clearinghouses can’t handle crypto-like volatility," Hayes argues. Unlike regulated markets, crypto’s "socialized losses" cap trader risk at margin—no clawbacks.
The Future: Global Perps and Stock Derivatives
Hayes bets stock Perps will be 2026’s hottest product. "Every major CEX and DEX will offer them," he predicts. Already, offshore platforms trade $0.00M+ daily in equity Perps—a figure Hayes expects to hit billions. Why? Institutions want weekend hedging (e.g., war, elections), while retail craves leverage. Exchanges like BTCC are eyeing the space, though Hayes warns: "Not all will survive the liquidity wars." Meanwhile, CFTC’s newfound "pro-innovation" stance (after years of crypto crackdowns) could accelerate adoption. One thing’s clear: Perps aren’t a fad. They’re rewriting derivatives history—just like Bitcoin did for money.
FAQs: Perpetual Contracts Explained
What’s the difference between Perps and futures?
Perps have no expiry date and use funding rates (paid every 1–8 hours) to peg to spot prices. Futures expire monthly/quarterly.
Why do traders prefer Perps?
No rolling contracts, higher leverage (especially in crypto), and 24/7 trading. Ideal for volatile markets.
Are Perps riskier than options?
Yes and no. Perps MOVE 1:1 with price (simpler than options) but high leverage amplifies losses. Risk management is key.
