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Bitcoin and ether price discovery increasingly driven by perpetual futures

Perpetual swaps, which account for about 93% of crypto futures volume, can lead price moves without a settlement date, using daily funding rates to balance crowded positions.

Reported · Written up by our desk · Market Structure

Bitcoin and ether price discovery is increasingly shaped by perpetual futures, commonly called perps, rather than traditional spot trading, according to research and market-microstructure findings covered by CoinDesk.

Perpetual swaps do not have settlement dates like traditional futures, meaning they can be held indefinitely and are instead kept in line with spot through daily funding rates. CoinDesk reports that perpetuals now make up roughly 93% of all crypto futures volume, with daily perp activity often larger than spot beneath it.

A study published in the Journal of Financial Markets by Carol Alexander and co-authors, as summarized by CoinDesk, found perpetual swaps on unregulated venues were among the strongest instruments for bitcoin price discovery, while regulated futures and U.S. spot exchanges tended to react rather than lead.

CoinDesk also cites work pointing to Binance’s perpetual market as a primary source of price formation across a fragmented crypto market. The evidence is mixed in some studies, but the overall direction of the literature has leaned toward derivatives as where new information is reflected first, including during some bear-market rallies, when perps demand growth has preceded price increases, according to Julio Moreno of CryptoQuant.

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