Last Thursday, BitMEX exchange announced to its users that it is shutting down. Practically, this will be no big whoop to anyone as BitMEX’s market share has recently been miniscule.
Emotionally, it’s a very big whoop to the OGs of crypto. Ben Zhou of Bybit summed up the sentiment on X: “End of an era. Respect to the legends who built it.”
Ten years ago, BitMEX made history by listing XBTUSD, the world’s first bitcoin future with no expiry date. This perpetual swap, or perp, never expires, so there is no pesky roll. A funding rate keeps it pinned to spot: when the perp trades above spot the longs pay the shorts, and when it trades below, the payments reverse.
By last quarter, crypto perps volume had grown to roughly five times that of the spot market.
The main appeal is leverage: while margin for spot does exist, it’s rarely more than 3x. Meanwhile, Hyperliquid dangles 50x and Binance 125x on perps, letting a dollar of margin control more than a hundred for as long as the collateral lasts. That’s in theory. In practice, most only use a fraction of that (even the seasoned rarely pass 5–10x) but the promise of 125x gets punters’ blood flowing.
Like kudzu growing over a fence, perpetuals are now spreading from crypto into traditional finance. On Hyperliquid, volume on real-world assets just exceeded that of crypto for the first time, at roughly $25 billion and about 54 percent of the total. According to Variational founder Lucas Schumermann (disclaimer: a Caladan portfolio company), more than $500M in open interest has accumulated on Variational’s Omni across 50 markets for real-world assets since they first listed in May.
The Financial Times reported today that tradeXYZ and Gate.com listed perpetuals tracking CXMT, the Chinese memory-chip maker that just raised $9.8 billion in a public offering on Shanghai Stock Exchange’s STAR Market (China’s version of NASDAQ).
Investors outside the Middle Kingdom have no simple way to access CXMT: STAR sits inside China’s wall of capital controls and investor eligibility. But on perp DEXs, access may require little more than a connected wallet and stablecoin collateral.
About $19 million of CXMT perps changed hands on the first day. Crypto exchanges have also run pre-IPO perps on SpaceX, Anthropic and OpenAI.
All this has left regulators scrambling to catch up. In 2021, the United States Commodity Futures Trading Commission (CFTC) slapped BitMEX with a $100 million fine for serving US customers, stating that digital assets must follow requirements from the traditional derivatives markets. Other perpetual exchanges were immediately spooked into banning Americans.
But after successfully keeping perpetuals offshore for the last decade, this May the CFTC turned around and approved Kalshi’s BTCPERP, the first perpetual futures contract on a registered US exchange.
In an ironic plot twist, CME then sued the CFTC, claiming it “overrode Congress’s definition of the term ‘swap’ and circumvented the regulatory regime required for that form of derivative”. The lawsuit is still pending.
Across the pond, Europe is not faring much better: MiCA leaves derivatives to the older MiFID regime, which generally caps leverage at 2x for retail. Offshore DEXs running 50x are not authorized to serve Europeans, but Europeans reach them anyway — these venues are permissionless and often beyond the practical reach of EU enforcement. Critics call the result “reverse discrimination”: the licensed venue is stuck at 2x while the rule-bender two clicks away runs 50x.
Old traders crossing over from futures desks to perpetuals have to learn new tricks. At first glance, crypto’s funding-rate arbitrage looks like the familiar cash-and-carry trade: buy the spot, short the perp, collect the funding. But there are unfamiliar gotchas.
First, funding is a moving target. Every venue has its own formula and its own settlement clock, with payments landing anywhere from every one to eight hours, and the formulas can shift without warning.
For the majors this is a manageable nuisance: bitcoin and ether funding clusters near the built-in baseline of 0.01% per eight hours, or roughly 11% a year, and mostly stays there. But altcoins with thin liquidity can invite manipulation. When a token carries heavy perp open interest on top of shallow spot volume, a trader can shove the spot price and move the funding the whole market pays.
This is not a theoretical risk. On March 26, 2025 someone on Hyperliquid opened a 20x, $7 million short in the memecoin JELLY, then pumped its thin spot to detonate the liquidation engine, leaving the community vault staring at more than $10 million in unrealized losses until validators voted to delist the contract and settle it by hand.
Funding has become both so central and so complex that it now trades as its own product. Last August Pendle launched Boros, where a perpetual’s funding rate can be bought, sold, or hedged as a market in its own right.
Second, there is no one to net your risk. While traders in traditional markets have the luxury of a prime broker underwriting netting risk and handing them margin efficiency, in crypto you post margin venue by venue, and very few brokers cross-margins across all exchanges, so collateral sits trapped in multiple accounts instead of working as one book.
And when the whole market breaks, no one steps in to make you whole. October 10, 2025 was a harsh lesson for many. Bitcoin fell about 14% in hours, and more than $19 billion of positions were liquidated in a day across 1.6 million accounts, the largest wipeout in crypto history.
When the liquidations overwhelmed the insurance funds, exchanges turned to auto-deleveraging, or ADL: the venue force-closes the winning side of the book to pay for the losing side’s bad debt. Hyperliquid ran its first platform-wide ADL, more than two years after it launched. Traders holding delta-neutral positions watched their profitable legs get closed, which left them with an unhedged long position in a falling market. Tarun Chitra of Gauntlet estimated ADL pulled about $650 million from traders for the sin of being right.
Finally, the newest puzzle: how to fund a perpetual on a tokenized stock when the underlying stock market is sleeping. From Friday night to Sunday, no regulated venue prices US equities, so the funding formula loses its spot anchor.
Venues split on this question. Ostium keeps each market to its underlying’s hours and stops the clock off-hours; Hyperliquid keeps trading and lets the perp lead, its own price becoming the benchmark until the market reopens.
As of this September, BitMEX will be no more, but the contract it invented will be a part of financial markets into the foreseeable future. Perpetuals not only dominate crypto, but they can also now price a metric ton of gold, a barrel of crude oil, and an equity IPO that is otherwise out of reach—offshore, on-chain, and around the clock.
