Over the past 17 years, a small number of blockchain innovations have managed to escape their own echo chambers and deliver step function improvements to the legacy financial system. Whether it was digital gold, stablecoins, or prediction markets, each product began as niche use cases designed for crypto natives, before proving broadly useful for society at large.
We believe the next such export will be the perpetual swap, and more importantly, the decentralized exchanges built to trade it.
While the industry has begun to converge on decentralized perpetual exchanges as an exciting growth story, there remains a broader misunderstanding of why they’re so important and *how *big the opportunity may be. Over the coming years we believe perpetual swaps will begin to absorb many new asset classes ranging from equities to commodities, with decentralized exchanges emerging as the largest winners from this transition.
Below we present our case for decentralized perpetual exchanges eating a material percentage of total options, futures and CFD volumes by 2030, which we believe could result in hundreds of billions of market capitalization for the sector.
*Full essay also available *on our website
A Short History of the Perpetual Swap
At its core, a perpetual swap is a derivative that enables traders to get continuous, leveraged exposure to an asset without expiration or delivery. Depending on price dislocations, longs and shorts make periodic funding payments between each other to keep perp markets in line with spot markets. Risk, meanwhile, is managed through continuous margining and liquidations, with profits and losses reallocated in real time within the shared collateral pool. Together, these mechanisms allow positions to remain open indefinitely so long as they remain solvent, concentrating trading activity into a single, 24/7 market rather than fragmenting it across expiries.
The perpetual swap was first formalized by the economist Robert Shiller in 1993, but for decades it remained largely theoretical. In traditional finance, the concept was incompatible with markets built around fixed expiries, batch settlement, centralized clearing, and bounded trading hours. This changed in 2016 when Arthur Hayes and BitMEX, cornered by Asia-based competitors, introduced perpetuals to crypto.
Despite Huobi and OKX controlling over 90% of average daily volume in crypto futures at the time, it took just two years for BitMEX to emerge as the dominant exchange, driven almost entirely by the runaway success of its perpetual swaps. By 2018, BitMEX had largely phased out its dated futures offerings and led all crypto exchanges in both liquidity and volume.
We believe this period serves as a revealing consumer case study that speaks to the competitiveness of perpetuals. In a neutral market arena, perpetuals decisively won out over traditional dated futures and options structures. Today, perpetuals trading in crypto is so widespread that notional perpetual volumes for BTC exceed spot volumes by roughly six times – a unique market structure dynamic not found in any other asset class.
The Rise of Decentralized Perpetual Swap Exchanges
While centralized exchanges like Binance currently dominate perpetual volumes with ~83% share, the most exciting evolution in this market is the accelerating growth of decentralized perpetual exchanges.
The idea of DEXs has been around for well over a decade, promising exchanges that were self-custodial, real-time auditable, permissionless to build atop, and globally accessible. However, many of these properties came with severe performance tradeoffs. Early perpetual DEXs suffered from limited throughput, high latency, and shoddy risk engines that left them unable to compete with centralized incumbents.
That notion changed with the launch of Hyperliquid, which delivered the first truly competitive perpetual DEX experience. Rather than simply copying exchange logic onchain, Hyperliquid rethought blockchain architecture from first primitives to prioritize trading as its core use case.
Its validator set was tightly co-located, materially reducing consensus latency and enabling market maker colocation, a feature long considered table stakes in traditional High-Frequency-Trading (HFT). The team complemented this with opinionated transaction sequencing rules that allow market makers to prioritize cancels, mitigating much of the toxic flow that plagued earlier blockchains reliant on auction-based ordering. Finally, the chain operates on predefined transaction fees rather than variable gas pricing, reducing execution uncertainty and lowering costs for sophisticated participants.
Hyperliquid’s emergence marked a clear inflection point in the DEX–CEX competitive dynamic. Since its launch, DEXs have captured market share versus CEXs at an accelerating pace, now that performance and user experience are no longer constraints. Today, Hyperliquid and Lighter already rank among the best venues on execution for retail traders on major cryptoassets.
The Great Perpetual Expansion
In November 2025, Hyperliquid took a decisive step beyond crypto perpetuals with the launch of HIP-3, repositioning itself from a crypto-only exchange into a general-purpose perpetuals platform. HIP-3 allows third-party deployers to launch new perpetual markets on Hyperliquid’s order book, provided they meet minimum technical standards and post 500,000 HYPE as a bond.
Because perpetuals are free-floating derivatives, they can in principle be created on top of any asset with a reliable price feed. In the three months following HIP-3’s launch, Hyperliquid saw a rapid proliferation of new markets spanning single name equities, equity indices, commodities, and even pre-IPO private companies. To date these new markets have driven over $100B in volume, marking the most successful attempt so far in bringing traditional asset classes onchain at meaningful scale.
The success of Hyperliquid’s HIP-3 markets has sparked a huge wave of interest from both incumbents and emerging competitors. In recent months, both Binance and Coinbase launched their own equity and commodity perpetuals. VC funding into the category has ballooned as investors erratically chase after the “next Hyperliquid”. Meanwhile, leading blockchains such as Solana have made it a top priority to “solve” perpetuals.
The undercurrent of all this activity is the emerging thesis that perpetuals are the fastest and most liquid way to get new assets on blockchains while embedding a real use case - especially compared to spot tokenization. Crypto, after all, has largely been an asset class servicing speculators chasing outsized returns, and perpetuals deliver the speculative juice that makes tokenization worthwhile to real users.
With the perpetuals market now expanding to include equities, commodities, currencies, and the long-tail of exotic assets in addition to core crypto markets (a concept we coined as "The Everything Exchange” in our original Hyperliquid thesis), we believe the opportunity for perpetuals DEXs is now an order-of-magnitude larger than what it was previously. This development also reshapes the business of these exchanges as it drastically reduces their dependency on crypto’s cyclicality.
How Perpetuals Eat Retail Speculation
To date, equity and commodity perpetuals have primarily found product-market-fit among crypto-native traders. For this cohort, the appeal is simply bringing traditional assets closer to home. For some users outside of the U.S., it’s to access assets that would otherwise require living in the right jurisdiction or having the right brokerage / private banking relationships.
While recent adoption among this cohort has been accelerated by crypto’s relative underperformance to equities and commodities since the historic 10/10 liquidation event in 2025, the most important question is what will drive growth from here. Who, beyond the crypto-native user base, can this innovation be exported to next?
We believe the answer lies in one of the most definitive secular growth trends in the world of finance – the rise of the global retail speculator.
The Rise of and Rise Again of the Retail Speculator
“Everywhere you look there’s greater leverage in the equity infrastructure for what has become a trader nation” – Paul Tudor Jones
As a growing body of market participants and social critics have observed, the world appears to be in the midst of a retail-driven speculation supercycle. While it's debatable what’s driving this behavior, ranging from the rising costs of living and lack of social mobility pushing people to speculate, to the simple fact that speculation is just far more accessible with mobile phones and deregulation, the trend is clear. More people across the world are becoming traders with each passing day. And with developing middle class populations, growing internet communities built around trading, and over 4 billion individuals across the world that are still “unbrokered”, we believe there is plenty of room for this trend to accelerate.
As this phenomenon has evolved, appetite for leverage has grown alongside it. Retail participation in derivatives markets has surged, with volume share reaching new highs across options, CFDs, and traditional futures.
According to Cboe estimates, retail broker activity accounted for more than half of total U.S. options volume in 2025.
In the same year, retail CFD trading volumes hit record levels, with five brokers reporting average monthly volumes exceeding $1 trillion for the first time.
Meanwhile, the CFTC has noted that average U.S. retail futures volumes remain roughly 50% above pre-pandemic levels.
Importantly, these flows are not just larger. They are faster and increasingly skewed toward shorter-term positioning. A 2024 CFTC sample suggests that the average retail futures trader holds contracts for only a few days, while Cboe data shows that retail engagement is most pronounced in options which expire within a single trading session.
Ironically, options and futures contracts currently consumed to fuel risk appetite were initially crafted for risk management. Perpetual swaps, by contrast, are purpose-built for directional risk.
It is plausible that retail traders have been funneled into imperfect instruments out of necessity, and that perpetuals may represent an elegant alignment between product design and user demand. The evidence has already presented itself in the crypto arena, where a new generation of derivatives traders has convincingly expressed their preference for perpetuals. Below, we review some of the intrinsic advantages perpetuals offer over existing alternatives.
Perpetuals vs. Options
“Occam’s razor, or the principle of parsimony, tells us that the simplest, most elegant explanation is usually the one closest to the truth.”
Compared to options, the enduring appeal of the perpetual swap lies in its simplicity.
For a retail trader seeking leveraged directional exposure, a perpetual removes much of the cognitive overhead embedded in other derivatives. There is no need to select an expiration date, manage time decay, or reason about implied volatility. Instead, exposure (whether long or short) is linear, continuous and intuitive - similar to holding spot positions.
From the market maker’s perspective, perpetuals are equally efficient. Liquidity concentrates in a single order book rather than fragmenting across expiries and strikes, as it does in options and futures markets. The result is deeper liquidity and more robust price discovery.
While perpetuals are less expressive than options for constructing bespoke payoff profiles or hedging complex portfolios, their simplicity is precisely what makes them effective across arbitrary holding periods. For trades intended to be opened and closed within days rather than months, perpetuals offer a clear advantage by eliminating the need to manage expiries altogether. In the CBOE case study discussed above, retail traders relying on 0DTEs for leverage are subjected to extreme levels of theta decay. With perpetuals, they could simply finetune their desired leverage ratios to manage a pre-defined liquidation level.
Although perpetuals are not a universal replacement for options, we do believe they better capture the speculative impulse for retail traders without the added complexity. Options will continue to play a critical role in expressing volatility views, managing tail risk, and constructing structured exposures. Their convexity driven returns remain attractive, as well as their ability to void liquidation risk before expiry. But these use cases sit at the periphery of where most retail trading activity occurs.
In essence, we believe the perpetual swap reflects an Occam’s Razor approach to satisfying retail’s rapidly growing appetite for leveraged trading.
Perpetuals vs. CFDs
While options trading has been an explosive phenomenon among U.S. retail traders, in Asia retail traders have increasingly tilted toward contracts-for-difference (CFDs). In 2025, the global FX/CFD industry recorded average monthly volumes exceeding $30 trillion, up from less than $10 trillion a decade earlier. Notably, ~60% of CFD site traffic originated in the Asia-Pacific region, while only ~9% came from North America.
Mechanically, CFDs resemble perpetuals in several important ways. They allow traders to take leveraged directional exposure without owning the underlying asset, typically without a fixed expiry, and with financing costs embedded into the position over time. Like perpetuals, they can be used for short-term speculation across a wide variety of asset classes. In many respects, CFDs represent a legacy system’s attempt to approximate the economic profile that perpetual swaps formalize more cleanly.
However, CFDs remain a structural compromise. They are offered over-the-counter by brokers, creating bilateral credit exposure between the trader and the dealer. Pricing is opaque, spreads are set discretionarily, and risk controls can be adjusted unilaterally. Liquidity fragments across broker books rather than concentrating in a central, transparent order book. Every position is in essence, an isolated and arbitrary agreement between the broker and the trader, where the broker dictates the terms of the relationship.
While options can offer distinct advantages over perps, it is difficult to identify any durable value proposition for CFDs. They inherit the very inefficiencies, opacity, and trust assumptions that perpetuals were designed to eliminate. In that sense, CFD brokers may be among the most structurally exposed incumbents to be disrupted by perpetual markets.
Democratizing 24/7 Trading
Another underappreciated advantage of equity and commodity perpetuals is their ability to unlock 24/7 trading. This represents a paradigm shift for retail traders by changing when and how returns can be captured.
In equities, researchers have established that confined trading hours can pose a structural disadvantage for retail traders, mostly attributed to an effect called the “overnight drift”. Data suggests that a disproportionate share of long-term U.S. stock returns accrues outside regular trading hours, with overnight price moves accounting for much of the realized performance.
This becomes intuitive when considering that earnings reports and major press releases are typically issued before the open or after the close, and that U.S. public markets are closed for more hours than they are open. Many market-moving headlines break overnight or over the weekend, periods during which retail traders are structurally sidelined. Access to these periods has traditionally been deepest among hedge funds, institutions, and high-net-worth participants able to transact through extended-hours venues or OTC channels with favorable terms.
Academic work suggests this imbalance may be amplified in so-called “attention stocks,” where retail participation is high. One 2022 study found that retail traders disproportionately place orders at the market open, precisely when liquidity is thinnest and adverse selection is most acute. The authors illustrate the magnitude of the effect with a striking example: “a day-trader who bought AMC Entertainment at the open and sold it at the close every day from the start of 2019 to late May 2022 would have suffered a 99.6% loss of capital - but, during the night, would have made a return of 30,000% over the same period (both ignoring transaction costs)”. While extreme, the example underscores how session boundaries alone can materially shape realized outcomes.
In attempting to explain this behavior, one theory suggests that retail traders often reflect on potential trades during evenings or weekends (when they are away from work), and then submit orders for execution at the next market open. If that is the case, why not remove the friction entirely and allow traders to engage with the market at their convenience?
Today, perpetual DEXs may be the one of the only venues on the planet that can accomplish this. By offering continuous exposure, they allow traders to engage with news as it happens, rather than being constrained by legacy market hours. In fact, this is no longer just theoretical. During the past weekend, Hyperliquid facilitated over $1 billion of crude oil trading during heightened fears around the Iran conflict. Traders were able to capture a 30% spot move from Friday’s close to Monday’s open while retail traders everywhere else were forced to sit out.
It should be noted that for now, spreads tend to widen during illiquid trading windows when traditional markets are closed. However, we believe many users are willing to tolerate imperfect execution in exchange for access. As perpetual DEX products mature, 24/7 trading may prove to be one of their most powerful user acquisition funnels.
All Roads Lead to Decentralized Exchanges
As the perpetuals opportunity becomes more obvious, legacy exchanges will inevitably enter the arena. Already we are seeing headlines from ICE, CME, and Nasdaq announcing that they’re rolling out 24/7 trading for their respective markets. We believe it's only a matter of time before they also offer perpetual-like instruments as well.
If incumbents ranging from traditional finance exchanges to centralized U.S. crypto exchanges introduce and expand their perpetual offerings respectively, what durable advantages remain for decentralized exchanges?
The Incompatibility Problem
Perpetual DEXs are, perhaps, crypto’s most misunderstood technology. Many critics view platforms like Hyperliquid as products of regulatory arbitrage that are simply waiting to get litigated. Over time, however, it may become clearer that these exchanges are actually modernizing the trading stack. In much the same way that electronic trading at the tail end of the 20th century transformed how markets handle execution, monitoring, clearing, and settlement, crypto-native exchanges are rethinking how these functions can be integrated and automated within a single system. It’s hard to imagine that just a few decades ago, the world’s trading activity congregated around physical exchange floors.
Rather than distributing responsibilities across multiple intermediaries, perpetual DEXs consolidate much of the trading stack into a single integrated system with atomic margining and settlement. The exchange itself performs many of the functions traditionally handled by separate actors: the frontend can act as the broker interface, smart contracts manage clearing and settlement in real time, and APIs allow market-makers to interface with takers natively within the venue. In other words, what previously required several layers of institutions and internal operating systems can be coordinated by a single protocol that never sleeps.
Additionally, we believe there is not enough credit given to these DEXs’ ability to stay solvent autonomously and transparently. In essence, Hyperliquid has built the world’s best algorithmic clearing engine on a verifiable ledger. Retail traders receive strong and predictable guarantees: they post a defined amount of collateral, leverage is applied programmatically, and only that posted margin can be liquidated. Internally, positions are continuously balanced between longs and shorts, and when necessary the system can trigger Auto-Deleveraging (ADL) to prevent the exchange from becoming insolvent.
While some critics point to the tail risks of ADL during extreme market events, it is precisely this mechanism that allows the system to support unprecedented levels of leverage—often in the 20–50x range—without relying on centralized capital backstops (aka it’s a feature not a bug). Unlike traditional margin systems, there is no chain of intermediaries, no discretionary credit decisions, and no bilateral loan agreements. On Hyperliquid, risk management is handled deterministically by code, and everyone plays by the same set of rules.
To large financial institutions accustomed to layered counterparty agreements and negotiable margin terms, this model may appear rigid or unfamiliar. But to the vast majority of retail traders, the product is perfectly sufficient and allows them to speculate in the most nimble and capital efficient manner. In a way, Hyperliquid is commoditizing leverage.
While extending trading hours may be relatively straightforward for legacy exchanges, introducing the aforementioned perpetuals stack is fundamentally incompatible within current regulatory and infrastructural frameworks. In the United States, equity/commodity perpetuals remain constrained by the Commodities Exchange Act and Dodd-Frank Act which require execution on regulated venues and clearing through centralized counterparties. These rules fragment the trading stack across brokers, exchanges, and clearinghouses, with each layer capturing its own economic rent and accumulating technological debt. The result is a system where execution, risk management, and settlement are handled by a number of bloated gatekeepers operating on different rails.
Legacy institutions cannot simply bolt perpetuals onto this framework. They would require a complete regulatory overhaul from the ground up or a coordinated effort to consolidate operations across the different participants in the stack. This means that perpetuals that truly mirror the 24/7 algorithmic functionality of crypto exchanges remain a long-lead project for incumbents, on the order of years. While key regulatory frameworks such as Dodd–Frank were understandable responses to the embarrassing risk failures revealed by the 2008 financial crisis, in hindsight, some of the changes may turn out to be an overcorrection. In attempting to eliminate entire classes of risk, these reforms may render their sector incapable of innovating in the face of technological change.
With that in mind, the real question is not whether incumbents can replicate crypto’s perpetuals experience, it’s whether they can build a competitive product before it’s too late. Could firms like Robinhood or ICE eventually build their own equivalents of systems like HyperCore and HIP-3? With sufficient capital, initiative, and regulatory accommodation, it is possible. However, the winners of technology tend to be path dependent, and by the time incumbents obtain the regulatory clarity required to launch perpetuals and complete the structural overhaul necessary to support them, the competitive landscape may already be decided.
Users will not sit around for five years and wait for a familiar brand to offer them perpetuals. Already, Hyperliquid is receiving broader media attention around the virality of their product. As the Hyperliquid Labs entity and their partners continue to accelerate their go-to-market strategies, the window for incumbents to adequately compete narrows dramatically. On the other end, Hyperliquid is continuously iterating on its own systems, making it increasingly more difficult for new entrants just to get to product parity.
Native crypto exchanges are the fastest horses in the race to service this global perpetuals demand and it may not be long before they reach escape velocity. In our view, backing incumbents bogged down by legacy infrastructure in this transition would be like betting on The New York Times to win online media, Intel to win GPU computing, or Blockbuster to win streaming. History has shown us repeatedly that new technologies create new victors.
Permissionlessness as a Scaling Advantage
Blockchains are fundamentally open, borderless systems. They enable anyone with an internet connection to access applications, and give developers the ability to build on top them, in effect functioning like a global API for money and finance. Decentralized exchanges built with blockchains inherit these “permissionless” properties, which we believe provide significant scaling advantages over incumbents long-term.
From a builder’s perspective, decentralized exchanges benefit from a virtuous utility-and-distribution flywheel as their developer ecosystems grow. Hyperliquid again provides a great example with their builder codes and HIP-3 markets.
Builder codes enshrine a fee-sharing mechanism that gives third-party applications a strong incentive to integrate Hyperliquid on the backend. What this means in practice is that while centralized exchanges hustle to onboard new taker flow themselves, Hyperliquid has a swarm of front-ends all competing for it. Incremental distribution can flip on like a switch, such as when Phantom onboarded 10M+ new traders overnight. In the future this could mean a large regional exchange offering access to Hyperliquid in its own local language, a U.S. regulated broker layer providing Hyperliquid traders increased leverage or protections, or even a social media giant importing perpetuals to their user base in pursuit of increasing ARPU.
HIP-3 as noted above, allows third-party deployers to launch new perpetual markets on Hyperliquid’s order book to trade novel assets. This open process for creating new markets enables Hyperliquid to list assets faster than any centralized incumbent. At equilibrium, each new auction should surface the next assets with the highest potential speculative demand, ensuring Hyperliquid is always capturing volumes from wherever attention and volatility are concentrating. This has already been a big boon during the recent metals surge, where a single silver perpetual market run by a third-party team saw daily volumes of over $1 billion.
When combined with builder codes, these mechanisms allow deployers to launch entire exchanges constructed on top of Hyperliquid. Today the total Hyperliquid third-party ecosystem generates $90M in run-rate annual revenue. Competitors are now forced to ask themselves a critical question: is it better to compete against Hyperliquid - or simply partner with them instead?
From a user's perspective, decentralized exchanges democratize capital markets. While U.S users may ultimately benefit from easier access to foreign assets, the largest beneficiaries will likely be non-U.S. users. Over 6 billion people have internet access across the world, yet 4 billion people remain “unbrokered”. Meanwhile international adoption of stablecoins, the leading dollar assets on blockchains, is growing at hockey stick pace.
Moreover, a significant share of speculative activity occurs outside traditional brokerage channels, particularly across Asia, the Middle East, and South America, where overnight and weekend trading dominates and access to U.S. markets is constrained. Decentralized exchanges allow these users to participate directly, aggregating global liquidity without jurisdictional siloes or gatekeeping.
Taken altogether we believe that the architecture of decentralized exchanges leads to faster experimentation, broader asset coverage, and a larger addressable market.
The Economics of Autonomous Systems
In our original Hyperliquid thesis we described Hyperliquid as “one of the most efficient cash flow machines in the world.” Today it operates at an $1B annual run-rate with 99% net income margins and only 12 employees. Not only are these metrics unparalleled across any company in the S&P 500 or Nasdaq, at $83M in revenue per employee it is among the most revenue efficient organizations across the globe.
While Hyperliquid is the most scaled expression of this model, it is not the only DEX with this economic potential. To understand this it's important to pull apart what is economically internal to the exchange and what is external to the exchange.
At the core of the thesis is the idea that DEXs are software, not institutions. The core team bears the upfront costs of building the exchange and may receive token rewards from the protocol for ongoing development. But unlike CEXs, it does not maintain fiat banking rails, large compliance teams, regional subsidiaries, customer support, or extensive custody and treasury operations. Once a DEX is live the only ongoing fixed cost is the small amount that it pays to validators in the form of token inflation. Hyperliquid validators, for example, cost an estimated $10K per month each to run all-in, which in the grand scheme of things is a rounding error relative to Hyperliquid’s $1B in annual run-rate revenue.
Indeed with user acquisition, localization, and asset listings increasingly externalized to third-party front-ends and ecosystem builders, the protocol itself more or less scales like software at zero marginal cost. This means that DEXes have enormous operating leverage once they reach escape velocity. At the limit, a sufficiently mature DEX may not need to pay any teams directly at all. Instead, third-party teams would contribute to the core protocol through open-source contributions, while being funded by the revenue derived from the businesses they built on top of the exchange. Such a DEX, at this point, would operate at effectively 100% net income margins.
Above all else, perpetual DEXes exhibit compounding advantages as they scale. As liquidity deepens, liquidation quality improves. Improved liquidation outcomes support tighter margin requirements and greater capital efficiency. Greater capital efficiency and stronger solvency guarantees increases user confidence and attracts additional liquidity. Over time, we believe this dynamic will lead to a winner(s)-take-most outcome for the sector, with capital accumulating where risk is managed most effectively.
The Quiet Power of Trust
“Not your keys, not your coins.”
“Don’t trust, verify.”
These proverbs have been passed down through each crypto cycle, warning newcomers of the perils of trusting centralized counterparties. For a long time it wasn’t feasible to trade cryptocurrencies without centralized intermediaries, due to the aforementioned challenges of building decentralized exchanges. As a result, the history of the cryptoeconomy is littered with exchange failures ranging from Mt. Gox to FTX.
Although decentralization is often thought of as a philosophical promise of blockchains, at a practical level, blockchain applications offer users substantially lower counterparty risk. Unlike CEXs which are effectively opaque closed systems, DEXs provide inalienable rights to users that are enforced by code.
For the perpetuals use case this means users can inspect margin logic, funding mechanisms, liquidation rules, and exchange solvency in real-time, rather than relying on broker assurances or ex-post interventions. We believe this is incredibly important as even in the years since the FTX collapse, CEXs have continued to erode user trust with issues ranging from opaque withdrawal controls to unclear internal risk failures. Moreover, similar failures of transparency and governance are not unique to crypto, but endemic to closed financial systems more broadly.
Ultimately financial markets are confidence systems. When the rules are clear and enforcement is mechanical, traders are much more willing to participate. This is the structural advantage of DEXs. By offering users maximum transparency, auditability, and fallback assurance (e.g Lighter offering users the ability to withdraw their collateral back to Ethereum mainnet at any time), users face lower counterparty risk. All things equal, this should make users more willing to use DEXs, while giving regulators a strong point of distinction versus offshore CEXs.
The Path to Hundreds of Billions
“Younger/Newer companies are opening up new markets and it’s easy to undersize the TAM. Is Uber or Lyft replacing taxis or reinventing car ownership?” – Philippe Laffont
Today, the leading perpetual DEXs make up less than $40 billion in fully-diluted market capitalization. Outside of crypto, the largest publicly traded exchanges and brokerage firms collectively represent over $1 trillion in market capitalization. We believe the perpetual DEX sector can penetrate, and even meaningfully grow this collective pie.
To reiterate, our thesis rests on three core assumptions for the perpetual DEX sector:
Perpetuals can be created for any asset with a legible price feed
Perpetuals can capture a meaningful share of traditional futures and options volumes, particularly in retail-driven segments of the market
DEXs possess structural advantages over centralized incumbents and will continue leading growth of the perpetuals industry for new asset classes
Sizing the Opportunity
Today, DEXs are a small fraction of total crypto perpetual volumes, given the size of CEXs. Compared to the broader global derivatives complex, they are basically irrelevant. Options, futures and CFD markets generate over $8 trillion in combined daily notional volume compared to just $20 billion for perpetual DEXs.
Of course not all of this flow is capturable. However, we do believe the market for short-dated options and global CFDs is a realistic opportunity for these exchanges over the coming years. As noted above, retail participation in these markets is only increasing as these products become more accessible, and perpetuals are an elegant alternative for retail traders and their lust for leverage. The size of the opportunity is hard to overstate. For example, even just capturing 20% of our estimated retail options flow (5% of total options volume) would 10x the entire perpetual DEX market.
The revenue implications of even modest market share capture are substantial. The table above illustrates the annual fee opportunity across a range of plausible take rates and market penetration levels within the global derivatives complex. At a 1–2 basis point effective fee rate, capturing just 1% of derivatives volume translates into roughly** $3–7 billion of annual revenue**. At 2–4% share the opportunity can grow quickly into the tens of billions. And remember, as detailed above, perpetual DEXs possess incredible margin flow-through, so you can think of this revenue more or less as profit.
The takeaway here is that perpetual DEXs do not need to monopolize global trading to become enormously valuable businesses. Even low single-digit penetration of these end markets warrants a drastic rerating of their expected business outcomes. We believe the retail speculation funnel is more than large enough to accommodate this initial rate of capture.
As a benchmark, on January 30th during a record day for metals volatility Hyperliquid captured roughly ~2% of global silver derivatives volume while offering competitive spreads for retail traders. Sustaining this level of performance across diverse assets and market regimes will not be trivial, but the early traction is encouraging.
If we extend our horizon long enough, it's not impossible that as perpetuals grow, traditional fixed-tenor futures may recede to their original purpose of long-horizon hedging, especially for assets with physical delivery. In most major contracts today, the majority of futures volume is driven by traders speculating on direction, carry, or volatility rather than producers or companies hedging operational risk. CFTC data across asset classes suggests that well over half (and likely closer to ~80%) of futures activity is speculative rather than commercial.
If perpetuals can replicate the economic exposure of these contracts while offering continuous trading, a simpler contract design, and unified cross-asset margin, they become structurally superior for that speculative share. In that world, fixed-tenor futures would remain essential for businesses such as commodity producers, airlines, and banks managing real-world exposures, while perpetuals would grow into the dominant contract type for speculation. With this end state in mind, there is a credible, albeit difficult, path toward double-digit penetration of the derivatives market as a whole.
We believe the market has yet to appreciate either this potential or the competitiveness of the perpetual DEXs long-term. Hyperliquid and Lighter – the market leaders – trade at just 17x and 3x, respectively, which is well below both their fintech and legacy exchange peers. Below we use the peer multiples above and our 2030 sector profit estimates informed from the above analysis to quantify the opportunity.
As laid out above, it doesn’t take much for the numbers to get large. Even still, it’s worth noting that all the above analysis is U.S. centric and assumes no growth in total derivatives volume moving forward. Factoring in holistic global derivatives volume and the larger surface area from 24/7 trading should expand this TAM meaningfully.
The Endgame Exchange – Perpetuals as a Trojan Horse
Finally, it is important to emphasize that the endgame for perpetual DEXs is not merely to replicate existing derivatives markets more efficiently, but to expand the scope of the derivatives market altogether. With initiatives like HIP-4, Hyperliquid can natively support adjacent offerings such as prediction markets and options within the same unified system. Combined with portfolio margining, this opens the door to endgame exchange architecture that is materially more capital efficient and expressive than anything possible under today’s fragmented legacy stack.
The Platform Opportunity
By this point it should be clear how lucrative the perpetuals opportunity is for blockchains. The data alone suggests this as Hyperliquid is the highest revenue generating blockchain in the world. What’s less clear, but almost equally as important, is that perpetuals is one of the hardest use cases to build on blockchains, and that by nailing it, every other use case of blockchains becomes easier to “bolt-on”.
As detailed above, historically, blockchains were littered with microstructural weaknesses including high latency, adverse selection, and limited throughput that made building perpetuals infeasible. Many of these issues, while important for use cases such as payments and spot trading, were not mission critical. For example, latency and throughput issues may mean a stablecoin transfer doesn’t arrive instantly, but it doesn’t mean you don’t eventually get your money. In contrast, a perpetuals exchange that can’t liquidate collateral fast enough becomes insolvent.
With the leading perpetual DEXs having addressed the issues, they’re unsurprisingly beginning to expand into new territory. Hyperliquid and Lighter have both launched spot markets and EVM sidecars in the past year, the latter of which enables them to offer products available on general-purpose platforms like Ethereum and Solana. In the same timeframe, Hyperliquid launched its own branded stablecoin through a community-driven process. And more recently, it announced HIP-4, providing the basic building blocks for prediction markets and options trading on Hyperliquid. The synergy between these use cases is exciting and best demonstrated through a hypothetical.
In the future, as more assets get tokenized on Hyperliquid you can imagine a world where you can use any basket of assets of collateral as margin to create any synthetic exposure. For example, you’re bullish on dollar debasement and AI infrastructure and hold a concentrated portfolio consisting of Bitcoin, Gold, and tokenized shares of Nvidia, SK Hynix, and TSMC. You post that as collateral to go short a software equities index because you think these businesses are cooked in the age of agentic coding. With a native options market, you can hedge your liquidation levels through dated contracts which roll over. After talking with a friend in Washington, you become worried about geopolitical risk so you protect your portfolio with “YES” shares for China invading Taiwan by 2030 on Hyperliquid’s prediction market. Your track record is so good, you begin offering your portfolio management services through a real-time auditable, self custodial vault that anyone can access. A user deposits stablecoins into this vault from a privacy pool on the connected EVM sidecar. That user found this opportunity through a new social trading interface centered around all the transparent financial data onchain. All this activity happens on a single global, permissionless system.
This is where endgame exchanges become something larger than exchanges in the traditional sense. Any venue that can aggregate these primitives under one roof allows for incremental growth where the whole becomes greater than the sum of its parts.
There are many steps before this future will be realized. But the big idea is that when assets share one fluid ledger, a Cambrian explosion of financial activity can emerge. And with that, we believe that perpetual DEXs, should they successfully execute on this platform opportunity, can generate Solana or Ethereum level outcomes and breach the trillion dollar mark long-term.
Tying it All Together
If you made it this far, congratulations. With the information above you now understand the perpetuals opportunity better than 99.9999% of people on earth. What to many seems like an incidental financial instrument birthed by the industry’s desire for endless speculation, may ultimately become one of the most important innovations to come out of the cryptoeconomy. An innovation that may one day be considered on the industry’s Mount Rushmore alongside digital gold, stablecoins, and prediction markets.
The evidence is in the data. Not only do perpetual swaps have a clear line of sight to growth as the dominant derivative instrument within the secularly expanding cryptoeconomy, they also have clear advantages over options and futures that will allow them to absorb a greater share of retail demand from traditional asset classes. In the early months of perpetuals’ “real world asset” expansion they’re already starting to impact global financial markets, most recently functioning as a price discovery engine on weekends for oil during the Iran conflict. We believe the primacy of perpetuals will only become more apparent as time passes.
Throughout this process we believe decentralized exchanges like Hyperliquid will continue to gain market share from centralized exchanges like Binance and Coinbase. The fact that Hyperliquid is already the runaway leader in equity and commodity perpetuals is the writing on the wall for what’s to come. Decentralized exchanges have structural advantages by being self-custodial, real-time auditable, permissionless to build atop, and globally accessible. These characteristics will enable them to beat out centralized exchanges over the long-run. Moreover, incumbent exchange businesses like CME and ICE will be unable to compete for years due to both regulatory and architectural incompatibilities.
Finally, as decentralized exchanges lead the growth of perpetuals, we believe they will also expand into adjacent categories. Perpetuals are the hardest product to nail on blockchains and once a blockchain can successfully host them, it naturally starts to aggregate other crypto use cases as a byproduct. We are already seeing early evidence of this with Hyperliquid’s expansion into spot trading and stablecoins, and soon prediction markets and options. It’s in this sense that perpetual DEXs are also Trojan horses for the financial platform of the future.
There will of course be growing pains along the way. There is still no regulatory clarity for DEXs. Perpetual DEXs will need to fine-tune their risk management engines ranging from optimizing auto-deleveraging mechanisms to exploring incremental insurance funds. They will also need to reduce funding costs and gap risks over time for traditional markets. Nevertheless, we believe these are just finer details, not thesis breakers, and what’s most important is being directionally accurate on the trend instead of squabbling over the hurdles along the way.
We ultimately believe that blockchains are natural monopolies with powerful network effects centered around liquidity, integrations, security, and developers. At scale these networks become digital superstructures consisting of interconnected assets, applications, businesses, and users that cannot be easily copied or replicated. As detailed above, the TAM can be credibly measured in the trillions, and the prize for the winning blockchain that hosts perpetuals will be one of the largest outcomes in global finance.
While it may seem that perpetuals have come a long way in the decade since their invention, the truth is the category is still just a speck of sand on the beach of global finance.
Yet this is precisely why this is all so exciting.
The great perpification is just beginning.
Important Legal Notices
This publication is for informational purposes only and does not constitute investment advice or an offer to sell or a solicitation to buy any securities or investment products. All investments involve risk, including the possible loss of principal. Past performance is not indicative of future results. Any forward-looking statements or hypothetical examples are subject to risks and uncertainties and are not guarantees of future performance. No client-adviser relationship is established by this material. The firm assumes no responsibility for the accuracy or completeness of third-party information referenced herein. Testimonials or endorsements, if any, comply with applicable SEC Marketing Rule disclosure requirements regarding compensation and conflicts of interest. The firm maintains records to support all claims in compliance with regulatory obligations. All content is protected by intellectual property laws and may not be copied or redistributed without permission.
