Recent market volatility has highlighted the challenges facing institutional adoption of crypto perpetual futures, with nearly $800 million in liquidations occurring in the past 24 hours amid Bitcoin's decline below $70,000. According to JPMorgan, institutional demand for perpetual futures remains muted, with the products better suited to speculative trading than hedging. The bank's analysts stated that their due diligence within J.P. Morgan suggests no or limited institutional demand that their desks are seeing. As reported by JPMorgan, the consensus opinion indicates that perpetual activity is more akin to speculative use cases by traders versus hedging by producers, consumers, or players with real exposure to underlying markets.
The report identified several features that limit institutional adoption of perpetual futures. According to JPMorgan, perpetuals offer unbounded basis risk, lack a forward term structure, and often lack physical delivery. These characteristics make perpetuals less useful for commercial hedgers and benchmarked asset managers who require contracts tied closely to regulated indexes and forward pricing curves. The bank noted that on-chain perpetuals are unlikely to appeal to U.S. institutions because they lack traditional clearing protections, while off-chain products reduce roll risk but retain other structural drawbacks.
The report highlighted significant concentration within offshore perpetual markets as another obstacle to institutional adoption. Citing public Hyperliquid data, JPMorgan reported that trading activity is dominated by a relatively small number of large participants, with roughly half of perpetuals volume funded by just 12 wallets. This concentration raises questions about market depth and the products' ability to support broader institutional adoption, as reported by the bank.
Perpetual futures, or 'perps', have become the dominant product in crypto derivatives markets, accounting for roughly 90% of crypto derivatives trading and often generating significantly more volume than spot markets. According to JPMorgan, these products allow traders to take leveraged long or short positions without an expiration date, using a funding-rate mechanism to keep contract prices aligned with underlying spot markets. The continuous trading, flexible holding period, and embedded leverage make them well-suited to retail traders and momentum-driven strategies, though the bank acknowledges these features are likely to sustain retail demand even if institutional adoption remains limited.
