Hua Er Jie Jian Wen·2025-09-25 06:24Core Insights - The cryptocurrency market is experiencing significant volatility, with over $1.5 billion in long positions liquidated, leading to the most severe flash crash in a month [1] - The introduction of perpetual contracts, a type of derivative without an expiration date, is gaining traction in the regulated U.S. market, indicating a shift towards mainstream adoption [3][8] Perpetual Contracts Overview - Perpetual contracts allow traders to hold positions indefinitely, with profits and losses directly tied to the price movements of underlying assets like Bitcoin [3] - The appeal of perpetual contracts lies in their high leverage, enabling traders to control larger positions with smaller capital [4] Risk and Mechanisms - The risk associated with high leverage is significant; a 10% drop in Bitcoin's price can lead to total liquidation of the initial investment [5] - To maintain price alignment with spot prices, perpetual contracts utilize a funding rate mechanism, where long position holders pay fees to short position holders when contract prices exceed spot prices [6] Market Growth and Popularity - The popularity of perpetual contracts has surged, accounting for approximately 68% of Bitcoin's trading volume, driven by traders seeking quick returns during a bullish market [7] - Major trading platforms are rapidly integrating perpetual contracts into their offerings, indicating a competitive landscape [8] Institutional Engagement - Coinbase has launched perpetual contracts for U.S. retail customers, with plans to increase leverage limits [9] - Other firms, such as Robinhood and Gemini, are also entering the market, with Gemini offering up to 100x leverage [10] - The profitability of these products is evident, as Robinhood reported that cryptocurrency and options trading contributed nearly 80% of its trading revenue in Q2 [10]