Bitcoin and ether markets are ruled by perps. SpaceX showed how far their influence can go

The article from CoinDesk explains how the price of major cryptocurrencies like bitcoin and ether is no longer primarily determined by spot trading, where buyers and sellers exchange the actual asset. Instead, perpetual futures contracts, commonly called "perps," have become the dominant venue for price discovery. These contracts are leverage-friendly and never expire, accounting for about 93% of all crypto futures volume, with their daily trading volume often exceeding that of spot markets. Unlike traditional futures, perpetual contracts don’t have a settlement date, but their prices are kept aligned with spot through a funding rate mechanism where the side with the crowded trade pays the other, maintaining a tether to the underlying asset price.

Academic studies referenced in the article point to derivatives markets, especially unregulated perpetual swaps and Binance’s perp markets, as leading sources for bitcoin price formation. Regulated futures and U.S. spot exchanges tend to react to these derivatives markets instead of leading price moves. However, there is some debate among researchers, with occasional evidence that spot prices lead at certain times or under stress. CryptoQuant’s head of research, Julio Moreno, noted that perpetual futures often lead price rallies during bear markets, even when spot demand contracts, indicating that perp demand expansion can signal upcoming price moves ahead of the spot market.

A notable real-world example of perp markets’ influence came with SpaceX’s $75 billion IPO in June, where perpetual futures contracts on platforms like Hyperliquid and Binance traded shares at around $170 before the Nasdaq debut, significantly above the $135 IPO price set by underwriters. The actual Nasdaq opening price and first-day intraday highs closely matched the perp market pricing, demonstrating how a market dominated by leveraged retail traders could accurately predict first-day demand better than traditional investment banks. However, SpaceX’s price later dropped over 40% primarily due to insider lockup expirations releasing a large supply of shares, a factor the perp market could not price.

The SpaceX case highlights a critical limitation of perp markets: they price demand well but are largely blind to supply dynamics. Consequently, while derivatives often lead price discovery and reflect market sentiment rapidly, they do not incorporate supply-side constraints or changes, which can affect longer-term price trends. This dynamic helps explain the observed market phenomenon where perp funding rates and demand sometimes predict rallies or sell-offs before they are reflected in the spot market, reinforcing the research conclusion that in crypto markets, prices are increasingly shaped first by derivatives and then followed by spot.