The debate around perpetual futures moving into regulated markets often blames the contracts themselves for systemic risk. However, the real danger lies in how trading platforms set their rules: use limits, margin requirements, index construction, and how defaults are managed shape risk far more than the no-expiry nature of perpetuals.
Recent crypto market turmoil, including the sharp deleveraging event in October 2025, involved multiple factors such as macroeconomic shocks, stablecoin instability, exchange outages, oracle failures, excessive use, and thin liquidity. What turns these sell-offs into systemic crises is the chain reaction caused by forced liquidations. When traders are liquidated under stress, prices drop sharply, which then affects other venues through shared reference indexes and arbitrage activities, leading to further liquidations. This vicious cycle is intensified by certain venue design choices like manipulable index pricing and automatic deleveraging that unfairly claw back profitable trades to cover losses. these issues stem from platform policies rather than perpetual contracts themselves.
The Role of Regulation and Institutional Appetite
Regulations help create a safety baseline through measures like segregated client funds, registered clearinghouses, and supervisory oversight. Yet, how a trading venue handles defaults remains a choice that can vary widely even among regulated entities. This highlights that systemic risk is not inherent to perpetual futures but depends on venue architecture.
There’s also a valid institutional concern about perpetuals beyond risk. A recent JPMorgan report indicated limited interest from institutional players, who view perpetuals mainly as speculative tools rather than true substitutes for traditional futures with defined expiry dates. Without a clear term structure and with basis risk, perpetuals don't easily replace dated futures in institutional portfolios.
