Vineet Luthra - Why Perpetuals Speak the Language of Tomorrow’s Investors - TOKEN2049 Singapore 2025

Hello Singapore. My name is Venit Lutra and I'm the co-founder of Highblock Capital. For anyone who doesn't know, Highblock is a premium trading terminal. Uh we provide derivatives data to traders, market research, back testing, and trade execution allinone platform. But today I'm going to be speaking about the product that we think is one of the most influential financial products in crypto.

the perpetual swap. Not only is it a financial product, but it's a phenomenon that has resonated with a lot of the new generation of investors. And I'm here to tell you why. So, every story needs a hero. And in today's hero, we have Arthur Hayes.

It started with a simple goal to allow anyone to speculate on the future of a price of an asset with leverage. No hassle of an expiration date or fancy contracts or rollovers. just a simple uh speculative asset. And the solution was in May 2016, BitMEX launched the world's first perpetual swap contract which changed the way we interacted with finance today. The numbers speak for themselves.

50 trillion notional traded across sexes and dexes. In fact, Binance Pers alone, the volume succeeds the London stock exchange plus the Stoko Tokyo stock exchange combined. PERBs cover 70% of all trading in crypto. We all know the rise of stable coins in today's day. It's obviously proven to be a product market fit in our industry.

But I'm here to tell you that there's two things that have product market fit. Stable coins and per. And the funny thing is that they have a symbiotic relationship with each other. The fuel is stable coin. That is all PERPS are margined and settled within stable coins.

And that infrastructure has allowed for 247 trading and global activity. And the engine is the perpetual. The demand and need for these liquid contracts has helped give rise and allowed the stable coin industry to also grow. So why are we talking about this today? What's so special about 2025?

Well, right now we're at an inflection point. Per started as a cryptoonly asset, but now we're seeing the rise of per spreading across different asset classes. We're seeing perpetuals in forex, in commodities, in stocks, both single name and indices, and some more nuance products such as private equity, predictions, prediction markets, and uh perpetuals on yield. Anything that could be tokenized can be turned into a per. Not only that, but there's been an acceleration of mainstream adoption.

A lot of major companies have started incorporating per into their major apps. This includes Coinbase and Robin Hood. And even when we look onchain, we look at some projects such as Phantom, which at first was used for spot swapping, now has partnerships with Dexes to allow for uh per trading. This is driving millions of new users to the ecosystem. So let's talk mechanics for a little bit.

What help? What what's the reason that the perpetuals work without an expiration date? Well, there's two main drivers. The first is the funding rate. The purpose of the funding rate is to peg the perpetual price to the underlying spot contract.

When the per price is greater than the spot, then the funding rate is positive and traders who in a long position will pay traders in a short position. It's a direct exchange from trader to trader. This this flow will make some of those positions who are in a long sell out of their long and then the price will gravitate back towards the spot price and then vice versa. If the perpetual price is lower than the spot price, then the funding rate will be negative and your short positions will pay your long positions. Mechanism number two is leverage and liquidations.

Leverage is the ability to borrow large capital to amplify your exposure. We've seen in some of these exchanges, you can take 100, 200, or even more leverage. But it's the liquidation engine that keeps this leverage in check. It's the automatic risk management system for all the exchanges. When your leverage position, when the unrealized loss gets close to your initial collateral, the exchange will automatically liquidate your position.

It's a brutal process. It but it but it allows users to have flexibility to take out leverage, but it also keeps the exchange risk-f free. So with these two mechanics, we can see why per is a better contract to be using over the spot market. One of the reasons is spot is is one-dimensional long only. Versus per you can go long, short, neutral.

It's more capital efficient. With the spot market, you only have 1x leverage versus the perpetuals. It's hyperefficient. No ability to hedge in the spot market versus the per market. If you're trading tradi, you're limited by some market hours.

And the the most important thing is that the perpetual contracts allows for monetization of skill. If you have an idea and you have a trade and you want to monetize on that trade, the perpetual contract is for way for you is a way for you to really amplify your capital. You can lever up and really make uh more money on the ideas that you have. Allows for a expression of complex opinions. It's a more complete, more expressive, and more powerful tool.

Period. So, what led to this shift? Like, why has perpetual contracts gained so much traction? Well, it's it's not something that happened overnight. It's a cultural shift that's been going on for many many years, specifically amongst the new generation of investors who are majority in crypto.

The new generation is going through rampid inflation and currency disbasement, skyrocketing costs of living and asset prices, being priced out of homes, $10 cups of coffee, complete erosion of trust within traditional financial institutions and governments, the death of a safe career path with the rise of AI, record high wealth and income inequality, and the belief that traditional paths to wealth such as a 401k can maybe lead to a dead end. So what is that resulting behavior? This need for an asymmetric opportunity with really high upside. An interest in high-risk, highreward arenas. This has led to the rise of things like sports betting, content creation, and day trading in many different forms.

A generation raised on infinite scrolling and ondemand everything expects the same in financial markets. And that's what PERPS offers. We offer a 247 global highstakes arena for a generation that feels locked out of the old one. So what about per attracted this new generation? Well, we talked about the mechanics, but another important aspect is the interface.

It's simple but powerful. What we say in crypto the UIUX is sometimes the worst problem. Projects have really good tech but really bad interfaces. I would argue that exchanges and trading applications had the best UIUX. Why?

Here are some examples. A leverage slider, a gamified version for you to express your leverage from 1x to up to 100 or 200x. Easy and simple. One-click entries for long or short positions. An omni channel ways of trading, mobile, web, telegram, Discord, many other web hooks.

advanced tools at the at the tip of your finger stick tips. Stop-loss, take profit, T-W orders, post only, reduce only. Very simple, very easy to implement, right? The velocity for any ecosystem to thrive is based on friction, right? And these exchanges have really lowered the friction.

In fact, you can onboard in under three minutes on your mobile phone. You can execute a complex trade with risk management in less time that it takes to load a legacy banking app. Not only that, the trading has become a social experience. Trading used to just be a single person thing. Now it's a community, right?

These communities create identity. You have these these new vocabulary that's come up. Wreck, hodddle, mooning, liquidation cascade, diamond hands. This is not just slang, but it's part of a language and and an identity that these people share. You have these P&L sharing cards.

I'm sure some of you have seen this all over CT, right? This is a new status symbol. This is a transparent, verifiable display of luck or skill. You have the rise of copy trading, which has now reached multiples of billions of dollars. It's transformed successful traders into new asset classes.

It's a direct attack on the traditional wealth management model. So now let's talk a little bit about data. In traditional finance, data is expensive. It's opaque. It's it's behind these closed doors.

In crypto, we've broken down the barriers. It's real time. It's free. Tickby tick orderflow data, tick-bytick trade data, submitt open interest data, funding rate data, live liquidation feeds, long short ratios, onchain wallet movements. All this is available to everyone.

Your average retail user has access to more data than they've ever had before. So the issue now is not who has the most data, but who can translate that data and visualize that data and interpret that data in a way that makes the most sense. So here are some visualization some visualization examples. You can do things like create heat maps on where you think liquidity lies, understanding where open interest or order book data at what price level is there the most open interest at? Or get even more complicated and maybe try to predict different liquidation zones, right?

Where do we think liquidations will happen? You can look at a a screener across different coins across one metric to see if there's any outliers in the market right now or maybe combine across all the tickers together and create global indicators to see what is your market sentiment. You can get really powerful and really complex. The perpetual contract industry has also created some new types of t trading strategies and the biggest one is the funding rate basis trade. It's the single most important delta neutral strategy in the digital asset space and it's the primary driver for a lot of institutional adoption on chain.

In bull markets, funding is structurally positive. So longs are willing to pay the funding rate to keep their exposure. One way that you can capitalize on this is by going long in the spot market and going short in the per market where you're delta neutral and then you capture that funding rate on a reoccurring basis. This has become a a cryptonative or perpn native yield strategy that that can often outperform traditional fixed income products. This is good if you're an institution or of an advanced retail that wants to implement the strategy.

And if you're retail, this is a great yield bearing asset that you can get involved in. This is an example of a heat map where we have different tokens and the funding rate across time where you can find where opportunities are the highest across funding rates. You can essentially farm funding rate opportunities with the 247 market. You also have lots of different arbitrage opportunities. You have funding rate arbitrage where you have funding rate fragmentation across exchanges where you can go long one exchange, short another exchange and capture that spread.

You have triangular arbitrage where which exploits price discrepancies across interconnected pairs. Let's say you have a a three-legged pair. You could sell U USDT for Bitcoin, sell your Bitcoin for Ethereum, sell your Ethereum for USDT, and you'll end up with more USDT at the end. Basis arbitrage, right, where the spot and perpetual market are not in line. You can go long one asset, short the other asset, and capture the SP spread as well when they converge.

Hedging strategies. Perpetuals are a great instrument for hedging. Who hedges? We have miners and validators. A lot of operational cost that miners and valors go through is in Bitcoin.

This is a very volatile asset and they can use perpetuals to hedge that exposure. DeFi farmers, if you just want to capture the yield when LPing, you can go into the perpetuals market and hedge your exposure. So then all you're doing is capturing yield. Venture capitalism, if you have a lockup period, you can go into the perpetual market and hedge your position there. And then there's what's we called liquidity farming.

So large traders have a difficult time of executing trades when there's a lack of liquidity in the market. For them to execute an order, they'll move the price and incur a lot of slippage. With the benefit of crypto and the the transparency of data, they can capture opportunities where there's high liquidity such as liquidation events to enter into those positions. So how would that work? Right?

price moves towards high density liquidation clusters like we see in this graph on the left. When when price moves towards that area, liquidation events are triggered which you can see on the graph on the right. The large trader can now enter into that position early on by absorbing that liquidation event and rem and avoid incurring a high slippage. Once the leverage is cleared, it will mean revert and provide instant profit. Okay, quickly just we can't talk about all the good things without talking about some of the risk of per.

So we have liquidation risks. The more leverage you use, the more liquidation you car the liquidation risk you carry. Funding rate cost. If you hold a position, you'll have to incur that fee over time. There's auto deleveraging risk.

Insurance if the insurance fund is shrinking, that's a red flag. Counterparty risk, i.e. FTX, and stable coin risk. However, in 2025, we're in a much safer ecosystem now.

Sorry. Um, we have real-time indicators for ADL transparency. We have proof of reserves. We have massive buffers and auditing on the insurance funds. With the rise of Dexes, we're removing custody risk because now it's all self-custody.

And with the rise of the stable coin ecosystem, we're removing a lot of the deep pegging risk. So, this is just the beginning. Eventually, we're going the goal is the perpetualization of everything. We're going to continue to diversify across different asset classes such as RWAS. We're going to have multi-asset collateral, right?

You post your uh your per per treasury bill as collateral for your Bitcoin. You can earn yield on that collateral, multi multi-asset yield. With the rise of dexes and trading on dexes, you have new data possibilities. for example, leverage uh leverage data on each and every trade. Imagine seeing a liquidation heat map on Nvidia.

You're going to have feed compression over time, right? As the the market gets more uh complex, when more competitors come in, fees will be erased to zero. And then finally, you'll have copy trading 2.0. Right?

This is a very traders will become immunable. You'll have funds tracking your top 100 wallets. uh and you'll have decentralized hedge funds that are verifiable on performance. So, thank you very much for your time. We do think this is a great opportunity that you should get involved in.

Uh we've also for thanking you for your attendance. We put a little uh code up there for one month free of high block if you'd like to take advantage. Thank you very much.