Perpetual futures have become the beating heart of crypto trading: during Q2 2025, the total trading volume of perpetual futures across centralized and decentralized exchanges is estimated to have reached $12 trillion — accounting for approximately 59% of all crypto derivatives activity and nearly 50% of total crypto trading volume during the quarter.
By mid-2024, crypto derivatives routinely accounted for 70 %+ of total market volume, a figure projected to hit $10 trillion annually by 2026 as institutional capital and innovation pour in!
Perpetual futures are derivative contracts that let you speculate on an asset’s price without an expiry date or owning the underlying token.
They have reshaped how traders leverage speculation, hedging, leverage, and arbitrage, transforming market dynamics across both spot and derivatives arenas.
From the beginning, perpetuals offered the freedom to bet on rising or falling prices, while hedgers found them invaluable for protecting spot holdings. Imagine holding ETH and fearing a dip, you simply short its perpetual instead of selling your coins.
The leverage they provide can be staggering depending on the platforms: with as little as $2,000, you could control a position worth $100,000.
This magnification of power has fueled enormous volumes.
A key innovation is the funding rate! Africtionless mechanism keeping perpetuals tethered to spot prices. Every eight hours, if perp prices exceed spot, longs pay shorts; if below, shorts pay longs. It’s peer-to-peer and self-correcting: when prices diverge, market incentives nudge them back together.
Often this funding is positive — overheated bullish sentiment means longs fund shorts, cooling excessive leverage. But rates can skyrocket (0.3 %–0.4 % per period) during mania, squeezing whales with massive positions.
Derivatives significantly shape spot markets in three interlocking ways: sentiment, arbitrage, and forced liquidations.
Volatile funding and widening price gaps influence discretionary traders. Meanwhile, arbitrageurs lock in risk-free profits by buying spot cheap and shorting expensive perpetuals, buying the underlying, then selling a perp contract. When prices realign, they unwind. Their activity exerts upward pressure on spot and downward pressure on derivate prices.
However, in hyperbull runs, especially on hyper-leveraged venues like Hyperliquid, the leverage-funding-liquidation cycle wields more power.
Picture BTC spot at $60,000, perp at $60,800. At 50× leverage and 0.03 % funding every 8 hours, the cost becomes huge: $90/day on a $2,000 margin.
A mere 2 % dip slams into margin requirements, triggering cascades: exchanges dump positions, slamming perp prices lower!
Market makers and arbitrageurs try to quickly hedge or rebalance, selling spot in turn. Fearful retail watches and joins in the chaos, spot crashes even though few were selling directly.
The perpetual market liquefies into the spot, violently.
The liquidation cascade risk is the most dangerous dynamics in the perpetual futures market, capable of triggering massive spot market moves even without direct asset sales.
In December 2024, Bitcoin experienced a violent 7% flash crash from $103,853 to $92,251, liquidating over $400 million in overleveraged long positions on derivatives platforms like Hyperliquid and Binance.
Funding rates had climbed to unsustainable levels over 0.1% per 8 hours in some cases, and open interest was heavily skewed toward longs. When BTC corrected just slightly, it set off a chain reaction of liquidations, with each forced sale exacerbating the next, culminating in a sharp market-wide plunge.
A very different but equally dramatic liquidation event occurred in July 2025, but this time it was a short squeeze.
A whale trader named “Qwatio” on Hyperliquid opened massive BTC and ETH short positions during a high-leverage accumulation phase, when open interest exceeded $5 billion. When Bitcoin surged and reached a new all-time high, those who bet against it suffered big losses. Qwatio’s leveraged short positions worth $334 million were liquidated within three hours. Over $650 million in short positions were forcibly liquidated in under 30 minutes, over $1 billion within 24 hours, pushing prices even higher in a feedback loop.
This brings us to the meteoric rise of Hyperliquid, a platform that has not only thrived amid these chaotic dynamics but actively capitalized on them.
For years, centralized exchanges like Binance, Bybit, and OKX dominated the perpetual futures landscape, offering deep liquidity, high leverage, and fast execution.
But they also came with trade-offs: opaque liquidation mechanisms, withdrawal freezes, jurisdictional risks, and custodial limitations.
Hyperliquid turned this equation on its head.
Launched in 2024 as a high-performance Layer-1 blockchain purpose-built for perpetual trading, it promised the speed and efficiency of a CEX with the transparency, custody, and composability of DeFi.
It didn’t just provide decentralized perpetuals — it rebuilt the whole trading system from the ground up. With near-instant finality, ultra-low latency, and negligible fees, Hyperliquid eliminated the performance gap that long kept serious traders glued to CEXs.
As on-chain traders sought more control, whales looked for faster execution, and institutions explored permissionless rails, Hyperliquid seized the moment. Its product-market fit was exact: high leverage, deep liquidity, fast order matching, and on-chain visibility with no KYC, no counterparty custody, no downtime (up until now!).
Within months, it claimed a majority of on-chain perp volume, drawing capital away from centralized exchanges and firmly establishing itself as the decentralized trading place for crypto leverage.
By October 2024 it was already leading decentralized perpetual platforms in daily volume. By March 2025 it crossed the $1 trillion cumulative perp volume mark, controlling over 60 % of on‑chain perpetual market share with weekly volumes between $40 billion and $50 billion.
The momentum didn’t stop there: May 2025 recorded $248 billion monthly volume, doubling TVL to $1.46 billion and generating over $70 million in revenue. Weekly protocol revenue reached $12.8 million — surpassing Ethereum’s $11.5 million over the same period. It’s now approaching $1 trillion in lifetime trading volume.
Whales love it.
They flock to its 50× leverage, deep liquidity, and fast execution engine (HyperBFT), enabling multi‑million‑dollar trades. Its open interest recently touched nearly $5 billion, with multi‑million‑dollar BTC shorts and 40× leveraged positions have become almost routine.
But that brings its share of risks — reports surfaced of suspicious high‑frequency wins raising money‑laundering flags, and some users complain of support blacklisting flagged wallets and freezing withdrawals.
We tackled the subject of money launderers using HyperLiquid in one of our latest report:
HyperLiquid: A New Route for Crypto Money Laundering?
We also tackled the $13.5 million Jelly price manipulation debacle here, and we touch on the broader security concerns in our 2024 Crypto Crime Report, available here:
The 2024 Crypto Crime Report
Hyperliquid has responded with some risk‑management upgrades, stricter vault limits, redesigned liquidation mechanisms, and governance‑enabled adjustable open interest caps to shore up stability after past incidents (like the aforementionned JELLY token flash scenario).
Their HLP Vault, a in-house market‑making product, has grown to over $500 million in TVL, and delivers impressive risk‑adjusted returns.
The platform is also pursuing regulatory engagement, even interacting with the CFTC on around‑the‑clock derivatives trading.
Hyperliquid’s native token, HYPE, has ignited a frenzy in recent months too!
Initially airdropped in late 2024, the token skyrocketed over 500%, peaking with a fully‑diluted valuation near $25 billion. After retracing to around $13 in mid‑2025, HYPE pushed decisively past $50 only days ago, briefly touching the $50 level before consolidating — now trading in the $45–48 range.
If Hyperliquid captures 20% of Binance’s trading volume or cements its status as a top‑three Layer‑1 blockchain, some analysts argue that HYPE could realistically jump toward $50–100.
As we have seen HyperLiquid complex and murky DeFi architecture exposes investors to undue financial risks and missed trading opportunities.
Risks on HyperLiquid are compounded — ranging from slippage-driven liquidations and overexposure to forced positions, to complex margin calls, fragmented data, and a lack of real-time market visibility that can obscure strategic decision-making and lead to suboptimal trades.
To shield our hedge fund clients from costly risks and allow them to unlock the full potential of HyperLiquid, we created the HyperLiquid Monitoring Suite — a platform strategically designed around three core, high-impact investment features:
Want the same edge that allows top hedge funds to maximize returns and minimize risk on HyperLiquid?
Get in touch with us today at nefture.com !
Perpetuals are a double-edged sword, powerful for speculation, hedging, and arbitrage, but also drivers of volatility and sudden crashes. In a way that reshapes crypto markets by altering price mechanics through leverage and funding.
Hyperliquid amplifies both sides, offering institutional-grade speed and liquidity, but with extreme leverage and systemic risk.
As the latest hub for risky perpetuals, Hyperliquid is a catalyst for both explosive gains and flash crashes, so navigate it wisely!
Nefture is a Web3 real-time security and risk prevention platform that detects on-chain vulnerabilities and protects digital assets, protocols and asset managers from significant losses or threats.
Nefture core services includes Real-Time Transaction Security and a Threat Monitoring Platform that provides accurate exploits detections and fully customized alerts covering hundreds of risk types with a clear expertise in DeFi.
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Understanding Crypto Perpetual Futures and the Hyperliquid Craze was originally published in Coinmonks on Medium, where people are continuing the conversation by highlighting and responding to this story.
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