Crypto perps offer deep liquidity and margin efficiency. Traders Krenn and Ong warn the floating funding rate creates a risk that 'cannot be priced and cannot be hedged'.
Alpha Score of 62 reflects moderate overall profile with moderate momentum, weak value, strong quality, strong sentiment.
Perpetual futures, or perps, now account for the bulk of derivatives volume on most crypto exchanges, with daily turnover routinely exceeding $200 billion. For altcoins outside bitcoin and ether, perps are often the only liquid derivatives venue. Dated futures with a fixed expiry are thin. Spot markets serve mostly holders, not traders.
CoinDesk spoke with two traders who live inside the perp market. Lucas Krenn, a derivatives trader at market-making firm STS Digital, said perps are the plumbing underneath everything his firm does. Kenneth Ong, an independent trader who has concentrated his activity in perps for six years, said perps offer better fills and lower fees. He also pointed to hedge mode, which allows a trader to hold longs and shorts on the same token at the same time. Hedge mode treats each side as a separate position. That is a big advantage over a regulated venue like CME, where a single account is typically netted by default. AlphaScala's proprietary scoring system assigns CME a 59 out of 100, a Moderate rating that captures the exchange operator's steady position in a market that perp-based venues increasingly dominate.
Both traders said margin efficiency was the real draw. Perps require only a fraction of a position's value as collateral. The same pool of capital can be split across a dozen venues and still back meaningful positions at each one.
The always-on nature of perps has shifted price discovery. Ong found himself in the middle of this during the Iran conflict in early 2026. The conflict's opening weekend in late February saw tokenized oil trading on Hyperliquid surge. That opening weekend, all the real reaction happened on crypto and tokenized commodity perps. The official markets were closed. By Monday, a chunk of the repricing had already happened somewhere else, Ong said.
Krenn sees the same mechanism playing out in perps tied to other traditional assets. Building a proper tokenized equity product requires recreating the legal and operational structure of traditional share ownership on-chain. A perpetual that references the price sidesteps all of it.
Both traders see perpification of various assets gaining momentum. Ong said tokenized oil trading over the weekend is basically a preview of what is to come for other commodities.
Ask any crypto trader what is wrong with perps, and you usually get liquidations. Krenn and Ong said the funding rate is the bigger concern.
A dated futures contract tells the trader the interest rate on the trade right away. A perpetual futures contract has a funding rate that changes over time and is typically charged every eight hours. The trader remains exposed to the floating rate while holding the position. The position has no built-in mechanism to lock the rate in.
The cost is unquantifiable at the point of trade and unhedgeable afterwards, Krenn said.
Ong was blunter. That funding is not just some tiny fee you can ignore, he said. If you hold positions for long periods, it can balloon to the point where a profitable trade loses money.
Bitcoin's current bear market kicked off with the Oct. 10 crash last year, which triggered widespread deleveraging. Exchanges socialized losses to protect their own systems. Longs got liquidated on price. Profitable shorts were force-closed anyway because the exchange's insurance fund could not absorb losses coming from the other side. Being right and being well-capitalized did not matter.
Krenn said the problem was not with perps. The problem is not a perpetual one, he said. The fault lies with the crypto exchange margin model, he said. Dated futures on those same venues sit behind the same insurance funds and the same deleveraging queue. The real distinction is whether you are facing a proper clearing house with a mutualized default fund, or an exchange that socializes losses onto the winners.
Krenn offered an insight that inverts what most people assume about perp risk. Being long is the structurally safer side, he said.
His logic is that positive funding is easy to arbitrage away. Anyone holding stablecoins can buy spot, sell the perp, and pocket the spread, thereby compressing positive funding.
When the funding rate is negative, the reverse arbitrage, going long the perp and short the spot, is difficult to execute. It only works if the trader can short the underlying token. It becomes difficult if the circulating supply is small and concentrated. Arbitrage is constrained, so the gap between perp and spot prices can persist. Funding rates can stay extremely negative for long stretches.
The long side has a bounded cost and an unbounded upside, Krenn said. The short side has a bounded upside and an unbounded cost. That asymmetry sits in very few risk models, Krenn said.
He pointed to lending protocol Euler's token this year as an example. A hard run on a listing and a small, concentrated float pushed funding on the perp deeply negative. Shorts were paying in the region of one percent every four hours to longs. Almost nobody could compress it because almost nobody had the token stash.
Perps have solved the access and cost problems of dated futures. They have introduced a floating rate exposure that cannot be locked in. Until there is a liquid dated curve in crypto, the whole market is carrying an interest rate exposure it cannot price and cannot hedge, Krenn said.
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