In 2020, crypto spot markets dominated trading volume. By 2025, the ratio had inverted: derivatives, particularly perpetual futures, now account for roughly 75-80% of centralized exchange volume. On-chain perpetuals have grown even faster, hitting $1-1.3 trillion in monthly volume.
This shift materially changed how crypto markets work. Price discovery, volatility dynamics, and trading strategies all evolved as perps became the dominant instrument. Understanding modern crypto markets requires understanding perpetual futures.
What makes perps different
Traditional futures expire. A December Bitcoin future settles in December, requiring traders to roll positions or take delivery. This creates basis, calendar spreads, and expiration-related volatility.
Perpetual futures never expire. Traders can hold positions indefinitely, with a funding mechanism that keeps the perpetual price anchored to spot. When perps trade above spot, longs pay shorts. When perps trade below spot, shorts pay longs. This continuous adjustment replaces discrete settlement dates.
The result is an instrument that behaves like leveraged spot exposure without the complexity of rolling contracts. Traders can hedge, speculate, or express directional views with a single instrument that doesn’t require active management around expirations.
How perps changed market dynamics
The dominance of perpetual futures reshaped several aspects of crypto markets.
Volatility amplification. Leveraged positions create forced liquidation dynamics. When prices move against leveraged traders, their positions are automatically closed, adding fuel to the move. A modest spot selloff can cascade into a major liquidation event as underwater longs get stopped out, pushing prices lower, triggering more liquidations. The flash crashes and liquidation cascades that characterize crypto volatility are largely perp-driven phenomena.
Price discovery migration. With most volume in derivatives, price discovery often happens in perp markets rather than spot. Large traders move perp prices first; spot follows. This reverses the traditional relationship where spot leads and derivatives track.
Funding rate signals. The funding mechanism creates a new data source. Persistently positive funding suggests crowded long positioning and potential mean reversion. Negative funding during selloffs can indicate excessive bearishness. Funding rates have become a sentiment indicator that experienced traders monitor closely.
24/7 hedging. Traditional markets close, leaving overnight exposure unhedged. Crypto perps trade continuously, allowing traders to maintain hedges around the clock. This changes risk management for portfolios with crypto exposure.
Trader workflows in a perp-dominated market
Different traders use perpetual futures differently.
Hedgers use perps to offset spot exposure. A miner with Bitcoin production can short perps to lock in prices. A fund holding spot can hedge during uncertain periods without selling the underlying. The continuous nature of perps makes this hedging seamless.
Directional traders use leverage to amplify views. Rather than buying $100,000 of Bitcoin, a trader might take a $100,000 perp position with $10,000 margin. The leverage magnifies both gains and losses, making position sizing and risk management critical.
Basis traders arbitrage the spread between spot and perp prices. When funding is elevated, they buy spot and short perps, earning funding while remaining market neutral. This strategy has become a significant source of returns in crypto, particularly for market makers and quantitative funds.
Volatility traders express views on implied versus realized volatility through options and perps combinations, using funding dynamics as one input to their models.
Intelligence for a perp-dominated market
Trading perps effectively requires understanding positioning, not just price. Where are liquidation clusters? Which entity types are building positions? How crowded is the current trade?
Arkham Intel, a blockchain intelligence platform, provides visibility into derivatives positioning alongside spot flows. Traders can see which wallets are active in perp markets, track liquidation risk concentrations, and monitor funding-rate-driven behavior patterns.
This intelligence matters because perp markets are zero-sum: for every winner, there’s a loser. Understanding who’s on the other side of a trade, and where they’re likely to be forced out, provides an edge that price charts alone can’t deliver.
Intelligence-native perpetuals
The integration of intelligence and execution is particularly valuable in derivatives markets where positioning matters as much as price.
Arkham Exchange, a transparency-first crypto trading platform for spot and perpetual futures integrated with Arkham’s on-chain intelligence tools, brings this integration to perp trading. Traders see entity-level flows, liquidation risk, and positioning data in the same environment where they execute. The same platform that surfaces who’s building or unwinding positions is where orders get placed.
This model differs from venues that bolt on generic analytics after the fact. When intelligence is native to the trading platform, the data layer and execution layer share context, reducing latency between insight and action.
On-chain perps and the transparency frontier
Centralized perp markets operate on private order books. On-chain perps, traded on decentralized protocols, add another dimension of transparency: all positions, liquidations, and flows are visible on the blockchain.
Arkham research tracks both centralized and on-chain derivatives activity, documenting how volume and positioning shift between venue types. As on-chain perps grow, the intelligence advantage from blockchain visibility extends to derivatives markets themselves.
The trajectory points toward more transparency, not less. Platforms designed around intelligence, treating transparency and risk visibility as first-class features, are positioned for this evolution.
Beyond spot-only thinking
Traders and institutions still focused primarily on spot markets are working with an incomplete picture. Price discovery, volatility, and market structure are all shaped by derivatives flows that don’t appear in spot data.
Understanding modern crypto markets means understanding perpetual futures: how they work, who trades them, and what their dynamics reveal about positioning and sentiment. The derivatives revolution already happened. The question is whether your tools and workflows have caught up.