Fuel and Rockets: Is the Perpetual Contract the Engine of This Round of Alt-Bull Market?

The 2025 crypto bull market may already be here, but the way it roars will be unlike any other. If you're still focusing on spot trading volume to gauge market heat, you're likely only seeing the tip of the iceberg. The true star of this bull market is perpetual swaps—a massive, highly leveraged, PVP arena driven by intense competition between long and short positions. Liquidity, narratives, and wealth effects here are defining the market like never before.

Why is liquidity unprecedentedly concentrated in the contract market? A numerical case is used to reveal how "short margin calls" become rocket fuel, the core mechanism that drives asset prices to spiral upward.

Disclaimer: This is all made up. Any similarity is coincidental.

Entertainment statement: Just for fun, don't take it too seriously

Statement from the nitpicker: If you think I am wrong, then you are right.

1. Data Perspective: When the Tail Starts to Wag the Dog

Phenomena are the best proof of theory. First, we use data to verify a startling fact: the trading volume of perpetual contracts has completely crushed the spot market.

• Trading volume comparison: According to data from data platforms such as TokenInsight in the second quarter of 2025, the trading volume of crypto derivatives (mainly perpetual contracts) on mainstream exchanges is typically 10 to 15 times that of spot trading . This means that when the spot market has a trading volume of $10 billion, the futures market's trading volume may have reached $100 billion to $150 billion.

• Open Interest: Looking at the open interest of mainstream cryptocurrencies like BTC and ETH, as well as popular new coins, we see that their size far exceeds the spot inventory of these cryptocurrencies on exchanges. This indicates that the vast majority of market participants' risk exposure and funds are deployed in derivatives.

• Funding Rate: For much of this bull market, funding rates have remained positive and high. This has attracted a large number of "arbitrageurs" who seek to earn a stable funding rate by shorting perpetual swaps and buying an equivalent amount of spot contracts. This further drains liquidity from the spot market and locks it into hedging positions.

Conclusion: The data clearly demonstrates a structural shift in market capital, attention, and focus. Perpetual contracts are no longer a subsidiary of spot trading; instead, they have become the core battleground for controlling short-term price fluctuations. The market has shifted from "spot driving contracts" to "contracts driving spot trading."

"At this moment, spot trading has become an 'accessory'."

2. The core mechanism revealed: How is the “short margin call rocket” launched?

The "strange phenomenon" in the market - price increases are not driven by spot buying, but by clearing houses on the contract side. This is the core mechanism of this round of "Perps bull market".

Let's use a simplified numerical example to explain this process.

Example: New coin "RocketCoin" (RKT)

• Background setting:

• RKT is a hot new project with an extremely low initial circulation of only 1 million (1/10) on the market. (Assuming the total circulation is 10 million)

• The exchange has launched RKT’s U-based perpetual contract.

• Current spot price: $10 .

• Due to the consensus that new coins should be shorted, the contract market has accumulated a large number of short positions. For example, between $11 and $15, there are $10 million worth of short positions (300,000 RKT) waiting to be liquidated.

Launch process:

1. Initial ignition: A whale or project owner invests a small amount of money in the spot market, for example, $200,000 to buy 20,000 RKT, forcing the spot price from $10 to $11. Because the spot market has low liquidity (a shallow market cap), the cost of driving up the price is extremely low.

2. The first stage of the rocket falls off (first round of liquidations): The RKT price hits $11, and the first short positions with stop-loss orders set at this price are forcibly liquidated (i.e., liquidated). Assume that these positions are worth $1 million.

• Liquidation Mechanism: The operation of "closing a short position" is "buying". The liquidation engine needs to immediately buy $1 million worth of RKT contracts in the market.

• Market maker hedging: When market makers who provide liquidity to the liquidation engine sell contracts, in order to avoid their own naked short risk, they will immediately go to the spot market to buy an equal amount of RKT spot for hedging.

• Price feedback: This spot buy order from the market maker further pushes up the already thin spot price, for example, from 11 to 12.

1. Second stage ignites (chain liquidation): The spot price reaches $12, triggering a new, larger batch of short positions to be liquidated. This process repeats perfectly with step 2: contract liquidation -> market makers buy spot to hedge -> spot price rises further .

2. Entering orbit: This cycle repeats itself, forming a positive liquidation spiral. Each level of short selling that collapsed fuels the next round of price increases, pushing the price of RKT from $11 to $15 and even higher. In this process, the initial $200,000 in "ignition" funds leveraged millions, even tens of millions, of dollars in passive buying.

Conclusion: This is the essence of a simple version of a "Perps bull market": using extremely low spot liquidity as leverage, creating counterparties (large short positions) in the contract market, and ultimately using the "margin liquidation" mechanism as the engine to drive prices upwards seemingly "out of thin air." The spot price increase is more the result and manifestation of this process than the cause. (Obviously, in practice, this isn't such a smooth process.)

3. Why “this version”? The right time, the right place, the right people

This phenomenon was less pronounced in previous cycles and is the result of a combination of factors:

1. Timing (Project Strategy): Projects in this cycle generally adopt a "low float, high FDV" issuance model. This creates the perfect "necessary and sufficient conditions" for artificially controlling spot prices and leveraging high-leverage contract markets.

2. Dili (Market Infrastructure): Perpetual swaps have become extremely mature after years of development. Their smooth trading experience, deep liquidity, comprehensive API, and market maker system enable them to handle massive amounts of capital and complex trading.

3. Harmony (market consensus and narrative):

• The paradigm of “empty new coins”: This exaggerated “consensus” actively creates a large amount of “fuel” for the market.

• The myth of getting rich quick: Contract gurus touting returns of hundreds of times the original amount continue to attract players eager for high risk, high returns. The extreme trading practices of the whales on Hyperliquid, in particular, fuel this narrative of "getting rich quick (or negative)."

• The temptation of the mechanism: Complex gameplay such as funding rate arbitrage and liquidation order grabbing has transformed the market from a simple long-short showdown into a multi-role, multi-dimensional financial game, further locking in liquidity.

Conclusion

Don't take it seriously. This "Perps' bull market" is just a tongue-in-cheek reference to underlying structural changes in the market. While it suggests a story of wealth growth, it's more a complex financial parable about the interplay of leverage, liquidity, mechanisms, and human nature, rather than simply about value discovery.

In this era, spot trading has become the ultimate hedge and price indicator, while perpetual swaps are the core vehicle that integrates narrative, capital, and mechanisms, truly defining the market's pulse. Understanding and adapting to the rules of this game, where margin calls are used as fuel, is key to navigating this cycle.

This is how finance or gaming works, pvp always brings new experiences.

May we always respect the market.