Perpetual Contracts Dominate Bitcoin and Ethereum Markets: The SpaceX Case Demonstrates Their Impact

Perpetual contracts have long been one of the main mechanisms through which the market seeks a fair price for Bitcoin, Ethereum, and other crypto assets. When these same instruments were applied to the private company SpaceX before its IPO, traders found themselves closer to a real assessment of demand than Wall Street.

If you ask how the price of cryptocurrency is formed, many will recall the spot market: a buyer meets a seller on an exchange, and the last transaction becomes the current price. For Bitcoin, Ethereum, and a significant part of the crypto market, this picture has been overly simplified for several years.

In practice, perpetual futures, or "perps," are playing an increasingly key role. These are leveraged contracts that have no expiration date: a trader does not buy the asset directly but opens a long or short position on its price. To maintain such a position, they provide collateral, monitor margin, and regularly pay or receive funding. If the price moves sharply against the position and the collateral is no longer sufficient, the exchange can forcibly close the trade.

It is estimated that perps account for about 93% of the total volume of crypto futures, and daily trading volumes in them regularly exceed the volumes of spot trades for the same assets.

A futures contract always has a settlement date. At this moment, its price forcibly converges with the spot price of the instrument it tracks. This instrument is called the underlying asset. A perpetual contract has no such date: the position can be held indefinitely, but for this, one has to pay or receive funding—a variable rate that is recalculated throughout the day.

How Perps Differ from Futures

• Futures: it has an expiration date, after which the contract is closed through the delivery of the asset or cash settlement.
• Perpetual futures: there is no expiration date, so the contract is maintained through margin and funding mechanisms.
• Settlement mechanism: for futures, the price converges with the spot price by the settlement date; for perps, this convergence is maintained by the funding rate.
• Liquidation: in both cases, a leveraged position can be forcibly closed if the collateral becomes too small; for perps, this risk is particularly noticeable because the position can remain open for a long time and constantly reacts to price movements.

Other Types of Derivative Contracts

• Classic futures: a contract to buy or sell an asset in the future under predetermined conditions.
• Options: a contract that gives the right to buy or sell an asset at a specific price but does not obligate one to do so.
• Swaps: an agreement to exchange cash flows or price differences between the parties to the transaction.

What Are Inverse Perpetual Contracts?

An inverse perpetual contract is structured so that collateral and settlements are made in the underlying cryptocurrency, for example, in BTC, while the position's value is usually tied to the dollar price of the asset. In a typical linear perp, the settlement is more often done in a stable currency or stablecoin, making it easier to calculate profit and loss in dollars.

• Main difference: in an inverse contract, the outcome of the position depends not only on the direction of the price but also on which cryptocurrency the collateral is held in.
• Typical scenario: a BTC holder can use an inverse perp to hedge the dollar price of Bitcoin without selling the actual BTC.

Why Prices Are Increasingly Formed in the Derivatives Market

Market microstructure researchers have repeatedly tried to understand where exactly Bitcoin first incorporates new information. In other words, which platform sets the momentum, and which markets are already catching up with the movement. In many studies, the answer shifts towards derivatives.

Karol Alexander and co-authors in a study for the Journal of Financial Markets concluded that perpetual swaps on unregulated platforms were the strongest source of price discovery for Bitcoin. Regulated futures and American spot exchanges more often reacted to movements that had already begun than initiated them.

Another study highlighted the perpetual market on Binance as the main price formation center in the fragmented crypto market. There is no complete clarity here: some research shows that spot can lead derivatives at certain frequencies or during stress episodes. However, the overall trend of recent years is clear: more signals are coming from the derivatives market.

Historically, we have seen that perpetual futures often lead the price during rallies in a bear market. For example, the increase in demand for Bitcoin perpetual futures preceded the movements of January 2026 and April - May 2026, noted Julio Moreno, head of research at CryptoQuant.

According to him, during such periods, spot demand decreased, while interest in perpetual contracts increased. Therefore, it was the perpetual market that pushed the price up, even though demand in the spot market was declining at that time.

How Funding Rates Keep Perpetuals Close to Spot

The main question is why a perpetual contract should stay close to the price of the underlying asset if it has no expiration date. The answer is the funding rate. Every few hours, the more overloaded side of the trade pays the other side.

If the perpetual is trading higher than the spot, traders in long positions, that is, those betting on a rise, pay participants with short positions. This makes holding longs more expensive and gradually brings the contract closer to the price of the underlying asset. If the situation is reversed, short sellers pay. A simple example: with a position of $10,000 and a funding rate of 0.01%, the payment for one period would be $1. For a single trade, this amount seems small, but with large leverage and long position holding, such payments can quickly start to affect the outcome.

Thus, the funding rate acts as an anchor, a sentiment indicator, and a real expense item. For some participants, it is almost as important as the price itself: margin trading amplifies both profits and losses, and constant payments can significantly change the final result of a position.

Why Traders Use Perpetuals

• Speculation: A trader opens a long or short position to profit from price movements without buying the actual asset.
• Hedging: An asset holder can open an opposite position to partially protect against price declines.
• Arbitrage: Market participants exploit the difference between spot, futures, and funding rates when prices diverge too much.

We surveyed over 100 of our traders. Those who really use the platform for confident positions want to see predictability, not another indicator that needs to be interpreted separately, said Hong Yea, co-founder of the trading platform Grvt. If you hold a directional position for several weeks, funding does not provide any fundamentally new information about the market. It simply eats into profits and losses while you wait for your scenario to play out. This is how users describe it to us, not as a signal of what the market thinks, he added.

SpaceX as a Real-Time Test for Perpetuals

For such a market to operate, a spot is not necessarily required. In May and June, one of the most notable markets in the world was a company that had not yet sold shares to public investors. This is about Elon Musk's SpaceX, and trading around it was built on crypto infrastructure.

SpaceX valued a record initial public offering at $75 billion at a price of $135 per share and began trading on Nasdaq on June 12. But long before this, traders on Binance, Coinbase, Hyperliquid, and other platforms were already buying and selling pre-IPO perpetual contracts. These instruments were designed to reflect the expected valuation of the company, rather than the actual stock price.

Hyperliquid was the first to present: on May 18, the on-chain derivatives exchange launched a synthetic perpetual contract on SpaceX. Binance opened its SpaceX market on May 21, and Coinbase joined on June 4. Later, similar contracts appeared on BitMEX, Bitget, and OKX.

Where Perpetual Contracts Are Typically Traded

• Popular platforms: Binance, Coinbase, Hyperliquid, BitMEX, Bitget, and OKX --- in this case, they served as markets or infrastructure for such contracts.
• Basic steps: choose a platform, fund the account with collateral, select a contract, set leverage and position size, and then monitor margin, funding rates, and liquidation risk.

The most interesting moment occurred when the market's accuracy could be verified. The day before the perpetual contracts were listed on Hyperliquid and Binance, they traded at around $170 per share. This was significantly higher than the IPO price of $135 set by underwriters.

The next day, SPCX shares opened, rose above $176 during the session, and closed the first day at $161, gaining 19%. The final price was almost where the perpetual contracts market had anticipated. Retail traders with a penchant for leverage assessed the first day's demand more accurately than banks, which had prepared the listing price for months.

The main trading opportunity lay in the difference between the IPO price and the perpetual contract price. The perpetual contracts market valued SpaceX significantly higher than $135, allowing traders to buy contracts before the listing and bet on the convergence of prices.

The mechanics were simple: each contract was supposed to automatically switch to the actual price of SpaceX shares after trading began. Thus, the gap between the pre-listing price of the perpetual contract and the actual opening price closed itself. Given that the IPO was oversubscribed by about four times, the direction of the trade seemed quite obvious to many, and the window of opportunity existed only until the listing.

Where Perpetual Contracts Went Wrong: Demand is Easier to See than Supply

Then the market faced what it had predicted but could not fully account for. After the June peak, SPCX lost over 40%, dropping from the listing price of $135 to around $115 at the time of publication.

The reason was not demand, but supply. Only a small portion of SpaceX shares were released at the IPO. Around August 6, approximately 900 million locked internal shares are expected to become available for sale. Such a factor is not something perpetual contracts can assess as clearly as the frenzied demand before trading begins.

Key Risks of Trading Perpetual Futures

• Leverage accelerates both profits and losses.
• Positions can be forcibly liquidated in case of margin shortfalls.
• Funding rates can gradually erode the trade's results.
• Sharp price movements and low liquidity can lead to execution at worse-than-expected levels.
• Perpetual contracts sense demand well but are less adept at accounting for future supply overhead and sales restrictions.

This episode illustrates both the strengths and weaknesses of perpetual markets.

• Advantages of perpetual futures: they quickly capture sentiment and buying desire, provide access to leverage, and allow for rapid accumulation or reduction of market risk.
• Disadvantages of perpetual futures: they are less capable of seeing future supply overhead, sales restrictions, and corporate details that are important for any company.

In this sense, SpaceX stock is not just a ticker on the exchange. It is also an asset in accounting, linked to ownership rights, restrictions, and future sales; its value can impact the balance sheets of owners and investors. Cryptocurrency operates differently, but the logic of markets is similar: prices often emerge where risk is more active and turnover is higher.

The SpaceX case has dramatically confirmed what is already visible in the regular trading of Bitcoin and Ethereum: derivatives are increasingly setting the direction, while the spot market adjusts accordingly. The strong side of derivatives is the quick reading of demand, while the weak side is almost complete blindness to future supply. This is something to keep in mind every time a Bitcoin rally or sharp drop first manifests in the funding rate, and only later reaches the spot market.

This content is provided for general informational purposes only and doesn't constitute financial, investment, legal, or tax advice. Any events, rewards, online promotions, or related information mentioned herein should not be considered a recommendation, solicitation, or invitation to purchase, sell, trade, or otherwise deal in any crypto assets. Crypto assets are highly volatile and may result in loss. The availability of WEEX services, products, and related events may vary by region. You are responsible for ensuring that your participation is in accordance with applicable local laws and regulations.