Pantera Capital: As perpetual contracts move towards the financial center, Hyperliquid is trying to accommodate everything

Author: Pantera Capital

Compiled by: Jiahua, ChainCatcher

Perpetual futures (also known as "perpetual contracts") are gradually becoming one of the dominant trading tools in global financial markets. It is evolving from a crypto-native phenomenon into a fundamental shift in market structure that traditional investors can no longer ignore.

This concept is not new. Today, the infrastructure supporting it has caught up, especially in the on-chain realm of decentralized finance. Just last week, with a series of actions taken by the U.S. Commodity Futures Trading Commission (CFTC), the U.S. regulatory framework has begun to formally embrace it.

Advantages of Perpetual Contracts

The first formal futures market was established in 1730 at the Dojima Rice Exchange, aimed at helping Japanese rice farmers hedge against crop price risks. External speculators realized they could make directional bets on rice prices through margin and leveraged trading of these contracts without needing to take physical delivery of rice (cash settlement).

Capitalism has always played its role. To this day, futures encompass all major asset classes (commodities, forex, stocks), and most futures trading is related to leverage and directional bets.

A perpetual contract is a futures contract that never expires. It does not set an expiration date but uses a funding rate: a small fee paid periodically between longs and shorts (for example, every hour, or most commonly every 8 hours on crypto exchanges).

When the perpetual contract is priced too high relative to the spot price, the longs pay the shorts; when priced too low, the shorts pay the longs. Basis arbitrageurs intervene to anchor the contract price to the spot price.

The lack of an expiration date sounds like a simple design choice, but it has significant advantages compared to existing derivatives (such as fixed-term futures and options): it is easier to manage from a practical execution perspective, easier to understand from a risk perspective, and natively supports round-the-clock trading.

From a practical execution standpoint, perpetual contracts require less management than traditional futures. Traditional futures have expiration dates (e.g., monthly), which is why they are often referred to as "fixed-term futures."

To hold positions over longer periods, traders must continuously roll over from one contract to the next, sometimes managing a series of contracts with different expiration dates, each with its own basis between futures and spot.

Perpetual contracts simplify this complexity into a continuous position without an expiration date, thus eliminating the need for rollovers. Traders can hold for seconds or, theoretically, indefinitely without worrying about trade management issues.

From a risk management perspective, perpetual contracts are also easier to understand than other derivatives. Fixed-term futures require a specific viewpoint on a time frame. For options with specific expiration dates, traders may judge direction correctly but still incur losses due to time decay or changes in implied volatility.

Perpetual contracts strip away these complexities, allowing traders to express beliefs more directly, almost entirely (though not completely) based on price.

Perpetual contracts also trade continuously, with no market time restrictions and no weekend closures. This cohort of internet-native users lives in a globally interconnected, always-online economy. For them, continuous access is not an added feature but a default expectation.

Driven by these market demands, traditional exchanges have been moving in this direction. If the current trend continues, perpetual contracts will be a natural choice.

Given their origins, fixed-term futures feel somewhat outdated. For the directional leveraged exposure most participants want, perpetual contracts are a more natural tool and possess all the aforementioned advantages.

Digital Assets Lay the Foundation for Perpetual Contracts

The design of perpetual contracts is not new and can be traced back to a paper published by Nobel laureate Robert Shiller in 1993. However, the existing market structure of traditional exchanges created too much resistance for them to gain popularity.

The digital asset industry does not carry the burdens of traditional systems but instead creates an environment for the flourishing of perpetual contracts in an internet-native way. The specific mechanisms that make perpetual contracts work were first solved at scale by BitMEX in 2016 for trading Bitcoin, and BitMEX achieved remarkable growth through this innovation.

Perpetual contracts subsequently gained tremendous appeal. By 2025, the total trading volume of perpetual contracts on centralized exchanges reached $62 trillion. This is many times the approximately $19 trillion spot trading volume and constitutes a large portion of the $86 trillion total derivatives trading volume, indicating a market preference for perpetual contracts over options.

For most of the past, perpetual contracts have been traded on centralized exchanges (CEX). A more interesting recent story is their migration to decentralized exchanges (DEX) on-chain.

There were many early attempts with varying degrees of success, the most notable being GMX and Synthetix, which use a pool-based trading model, and DYDX, which uses a central limit order book and dedicated blockchain, but they struggled to compete with centralized platforms in terms of latency, liquidity, and user experience.

Hyperliquid has elevated DEX perpetual contracts to a new level, significantly increasing the market share of on-chain perpetual contracts. The trading volume of DEX perpetual contracts has reached 14% of CEX perpetual contract trading volume, whereas this ratio was less than 1% when Hyperliquid first launched in early 2023.

The Rise of Hyperliquid

Hyperliquid is the largest decentralized perpetual contract exchange, accounting for about 40% of on-chain perpetual contract trading volume. It was conceived by Jeff Yan, an alumnus of Harvard's Math 55 course and a former high-frequency trader who had been running a low-profile market-making firm, Chameleon Trading, for several years.

The collapse of FTX was the catalyst for building Hyperliquid. Yan redirected his trading team's focus to create a decentralized alternative to replace the centralized exchanges that had just let users down, while also recognizing that existing blockchains were too slow for professional on-chain trading.

The team built their own Layer 1 blockchain specifically designed for trading, which was globally launched at the end of February 2023. One of the changes included adding a speed bump feature to prevent the most aggressive high-frequency trading firms from exploiting market makers, sacrificing short-term trading volume for healthier growth.

To address the cold start problem faced by all exchanges, the team guided liquidity by opening their proprietary trading algorithms, allowing anyone to participate through an on-chain treasury called HLP (Hyperliquidity Provider).

Offering this high-performance strategy to the public for free brought additional benefits, winning community favor, and community members became consistent advocates, further driving Hyperliquid's growth.

Due to concerns over regulatory uncertainty in the U.S. regarding decentralized finance and perpetual contracts, they also moved to Singapore in the spring of 2024. This is one of many significant losses the U.S. has suffered due to its previous regulatory stance, which is now being corrected.

With a core team of high talent density, a spirit of stakeholder consistency representing the best ideas in cryptocurrency, and incredible execution power, Hyperliquid has surpassed its competitors to become the largest and most profitable decentralized perpetual contract exchange, with monthly trading volume exceeding $250 billion and annualized revenue reaching $800 million.

Hyperliquid's trading volume continues to grow, and over time, its trading volume share relative to centralized exchanges is also increasing.

From Digital Assets to "All Finance"

As Hyperliquid expands beyond crypto-native assets into stocks, commodities, indices, and private companies, its growth has accelerated this year. Jeff Yan describes this vision as "accommodating all finance" on a single platform.

Hyperliquid has two blockchain-native attributes that help it successfully extend its vision to traditional assets typically traded on traditional exchanges. First, as a decentralized exchange, Hyperliquid is open by default around the clock, including weekends and holidays. In contrast, traditional exchanges like the New York Stock Exchange (NYSE) or the Chicago Mercantile Exchange (CME) are only open five days a week.

The second attribute is that Hyperliquid is permissionless, meaning any third party can quickly list the assets people most want to trade. The listing market is not limited to the initial imagination of Hyperliquid's core team.

Permissionless listing is unlocked by Hyperliquid Improvement Proposal 3 (HIP-3), which allows any third party to list new perpetual contract markets without permission and incentivizes them with a portion of the trading fees. An independent group operating under the trade.xyz brand is the most active deployer.

As a result, the Hyperliquid platform can quickly adapt and attract trading volume on any currently hottest assets, even when traditional markets are closed, yielding impressive results. On-chain perpetual contracts are becoming a parallel, always-online derivatives platform, beginning to meaningfully compete with traditional infrastructure.

The most obvious evidence appears during pressure moments outside traditional trading hours. When gold and silver prices soared at the end of 2025, Hyperliquid was the only platform trading these assets over the weekend, including the moment China announced changes to silver trading collateral requirements. Silver briefly reached 2% of global derivatives trading volume at its peak.

When the Iran conflict began on a Saturday morning at the end of February, Hyperliquid was the only platform for trading oil that weekend, with daily crude oil trading volume surging (editor's note: the original text is missing numbers here).

When oil futures opened on Sunday evening, the opening price was exactly the price at which oil perpetual contracts had already been traded on Hyperliquid. Oil trading reached 2% of global oil derivatives trading volume at its peak.

A month later, a fully licensed S&P 500 perpetual contract surpassed $100 million in trading volume on its first day. Trading volume of traditional assets on Hyperliquid sometimes reaches as high as 40%, whereas this figure was essentially zero at the end of 2025.

Mainstream Attention Begins

Hyperliquid's appeal has gained mainstream attention this year. We are hearing more and more traditional asset hedge funds referencing Hyperliquid's prices and even considering trading on the platform to respond more timely to world events.

Hyperliquid is becoming the exchange for price discovery when all other markets are closed. This not only means weekends but increasingly applies to private companies before IPOs.

On the day of Cerebras' IPO (the largest IPO so far this year), the banks underwriting the IPO were monitoring prices on Hyperliquid. A circulated photo shows a banker’s screen displaying Hyperliquid's trading interface before the opening.

Traditional exchanges on Wall Street are also taking notice. On May 27, at Bernstein's strategic decision-making meeting, Intercontinental Exchange (ICE) founder and CEO Jeffrey Sprecher called Hyperliquid "larger than Nasdaq" and noted that ICE had met with its founders several times.

Just two weeks ago, reports emerged that ICE and CME were pressuring regulators to restrict Hyperliquid, indicating they see it as a real competitive threat. The significance is that one of the world's major exchange operators is now publicly acknowledging Hyperliquid as a serious competitive challenge rather than a marginal experiment.

The public equity market has also shown interest. Hyperliquid Strategies Inc. (NASDAQ: PURR) is a digital asset treasury ("DAT") dedicated to Hyperliquid, with Pantera as its cornerstone investor. The company holds HYPE on its balance sheet, with former Barclays CEO Bob Diamond as chairman and David Shamis as CEO.

The two have brought the case for HYPE directly to mainstream financial media in the U.S., including CNBC's Squawk Box and Bloomberg, lending traditional financial pedigree and credibility to this crypto-native asset, thereby increasing its visibility.

As of June 1, 2026, PURR's trading price has risen over 200% year-to-date and is one of the few DATs that consistently trades at a premium to net asset value, indicating strong demand.

The next catalyst to watch is the IPO of SpaceX, reportedly targeted for later this month. There is a SpaceX perpetual contract on Hyperliquid, providing traders a way to express their pricing expectations for the company before it goes public on Nasdaq.

As of June 1, 2026, SpaceX is currently trading on Hyperliquid at about $200 per share, above the level rumored to be the price bankers hope to set for the stock.

Every market participant is watching this IPO, and we can reasonably expect that Elon Musk, the well-known "heavy internet user" and crypto supporter, CEO of SpaceX, may drive bankers and potential investors to consider the trading situation of SpaceX on Hyperliquid, significantly boosting the platform's visibility.

How Big Can This Develop

Hyperliquid is an on-chain protocol with a capital structure based on tokens. HYPE is the native token, and Hyperliquid's protocol economics accumulate value through it, most notably through a programmatic buyback mechanism that utilizes 99% of the platform's revenue, a capital allocation strategy similar to many fundamentally valuable stocks.

The investment case for Hyperliquid is based on several pillars:

A large and growing target market: Hyperliquid is a disruptive platform targeting an attractive and expanding terminal market. Perpetual contracts are an innovative product that better serves a large number of investors than traditional derivatives, historically monetizing through highly attractive trading fees. As Hyperliquid expands from the crypto-native market to its goal of "accommodating all finance," its total addressable market grows exponentially.

Strong execution and scale flywheel: The protocol expands more quickly and successfully than previous decentralized perpetual trading exchanges, capturing a massive market share. In this market, scale creates a flywheel advantage: higher trading volume drives order book liquidity, which continuously improves user experience and attracts more capital.

Exceptional product experience: Hyperliquid provides a high-quality user experience by operating on a custom Layer 1 blockchain built specifically for derivatives trading. User feedback consistently emphasizes that the platform far exceeds other decentralized exchanges and directly competes with major centralized exchanges in terms of speed and user experience.

Direct and strong value accumulation for token holders: Crucially, these strong fundamentals directly translate into the protocol's profitability and token value. Hyperliquid generates $800 million in annualized revenue, almost all of which is reinvested into its programmatic token buyback mechanism. This creates an unusually tight alignment between protocol growth and token holder value.

Looking at the big picture, Hyperliquid's total addressable market (TAM) is approximately $100 trillion in nominal trading volume per day. Currently, the trading volume of 0DTE options and leveraged ETFs used by investors for simple high-leverage directional exposure is about $200 billion per day.

Daily trading volume for commodity derivatives is $2 trillion, and Hyperliquid has proven it can make progress, especially during holidays and weekends. Daily trading volume for forex derivatives is about $8 trillion and is almost entirely undeveloped on-chain, making it a massive blue ocean opportunity.

As long as it sustainably captures a very low single-digit percentage of this combined trading volume, potential revenue could be five times what it is today, with valuations potentially having similar expansion potential.

Nonetheless, it is important to recognize that Hyperliquid also faces real risks. The biggest risk Hyperliquid faces is regulatory. Perpetual contracts cannot currently be freely traded in the U.S., although there is a trend toward legalizing and listing them.

Hyperliquid is a decentralized exchange, meaning it has no KYC requirements. While it has set geographic barriers for U.S. users, it is not impossible to circumvent these.

If perpetual contracts are legalized in the U.S., Hyperliquid will face a more challenging competitive landscape and may lose trading volume share from U.S. users who migrate to regulated platforms. One mitigation strategy is that Hyperliquid could also launch a regulated exchange version in the U.S., similar to other platforms.

The Door to Regulatory Developments Opens

The biggest single constraint on the growth of perpetual contracts in the U.S. has been regulation, and it is this uncertainty that pushed Hyperliquid's team to offshore Singapore. Americans cannot use true perpetual futures, as both centralized and decentralized platforms have set geographic barriers for U.S. users.

This situation began to change last week. The CFTC approved Bitcoin-based perpetual futures contracts submitted by Kalshi, a registered exchange in the U.S., and also cleared the way for certain crypto perpetual contracts for Coinbase through foreign subsidiaries, treating them as foreign futures.

The main line is that the CFTC has opened a path for regulated crypto perpetual contracts under the existing futures framework, rather than requiring the creation of entirely new rules.

Some policy advocates believe that the absence of perpetual contracts in the U.S. in the past was less a thoughtful regulatory choice and more a commercial accident of existing companies deciding which products to list, and there has never been a fundamental reason indicating that the CFTC could not approve them. If and when exchanges apply to list more perpetual contracts, the CFTC now only needs to act to clarify this.

The more challenging question is what conditions are needed to bring decentralized perpetual contracts to U.S. users, and the path here is still unclear. A centralized participant can register as a U.S. exchange today, and we have already seen other companies like Coinbase and Kalshi wanting to list true perpetual contracts.

For a permissionless on-chain protocol, the commission would need to broaden the exemption scope, including exemptions from the requirement that derivatives must trade on registered exchanges and exemptions regarding who can access certain contracts.

The U.S. Securities and Exchange Commission (SEC) and CFTC both hold a supportive stance towards innovation and have previously issued statements supporting the view that "nothing in the core stack of on-chain protocols inherently requires registration." However, balancing permissionlessness and no KYC with reasonable concerns about sanctions and market integrity will require some effort to address.

Perpetual contracts began in the margins of cryptocurrency, where market structures evolved the fastest. They are now moving toward the center of global finance. Recent actions by the CFTC do not resolve all regulatory issues, especially for permissionless on-chain platforms, but they do mark an important shift.

The U.S. is beginning to embrace this product rather than reject it. Hyperliquid is at the center of this shift. It combines the best attributes of DeFi (open access, round-the-clock markets, transparent settlement, and high alignment of interests among parties) with a product that increasingly seems better suited for modern trading than its competitive tools.

The question is no longer whether perpetual contracts matter outside of cryptocurrency; the market has answered that question.

The question is whether the infrastructure first built by the blockchain industry can become a place where more and more financial sectors engage in risk pricing, trading, and price discovery.